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The IRS now has the power to take your passport away


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To my American friends in Boquete:

 
2016 brings new laws in the United States, including the "FAST Act," which in section 32101 gives the IRS new powers to tell the State Department to revoke your existing passport and deny issuance of new passports if you have a "seriously delinquent tax debt." If that weren't bad enough, section 32102 authorizes the IRS to use private debt collectors to try to recover what you owe them.
 
Revoking your passport will happen if your tax debt is $50,000 or more. But remember, failure to disclose your foreign bank accounts, foreign corporations, and foreign foundations come with a penalty of $10,000 per form, per year--so you can hit $50,000 pretty quickly.
 
As I wrote in October, the time is now to come forward and declare your assets in Panama. Even without any undeclared foreign assets, you should make sure that you file your 2015 tax return on time.
 
I encourage any of you needing to take care of your tax situation to contact me for a free initial consultation. Straightforward 2015 tax returns start at just $500; clearing up delinquent foreign asset disclosures starts at $1,200.
 
Thank you.
 
 
Don Joffe, CPA
International Accounting Services, LLC
+1 (765) 236-6739
 
=============================================
 
2016 BRINGS IRS POWER OVER PASSPORTS, USE OF PRIVATE DEBT COLLECTORS
January 4, 2016 - Forbes Magazine
 
If you have a large tax debt, you might have trouble traveling, since the IRS power to revoke passports was signed into law as part of the FAST Act. That can be a double worry, since some people may find that passports are required for domestic travel. A new section 7345 of the tax code is called “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.” The idea goes back to 2012, when the Government Accountability Office reported on the potential for using the issuance of passports to collect taxes.
 
The law says the State Department can revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt in an amount in excess of $50,000. Administrative details are scant. It could mean no new passport and no renewal. It could even mean the State Department will rescind existing passports.
 
Taxing Passports
 
The State Department will act when the IRS tells them, and the list of affected taxpayers will be compiled by the IRS. The IRS will use a threshold of $50,000 of unpaid federal taxes. But this $50,000 figure includes penalties and interest. And as everyone knows, interest and penalties can add up fast.
 
If you are contesting a proposed tax bill administratively with the IRS or in court, that should not count. That is not yet a tax debt. There is also an administrative exception, allowing the State Department to issue a passport in an emergency or for humanitarian reasons. But how that will work isn’t clear, nor is the amount of time it will take to get special dispensation. You would still be able to travel if your tax debt is being paid in a timely manner, as under a signed installment agreement. The rules are not limited to criminal tax cases or where the government thinks you are fleeing a tax debt.
 
In fact, you could have your passport revoked merely because you owe more than $50,000 and the IRS has filed a notice of lien. A $50,000 tax debt including interest and penalties is common, and the IRS files tax liens routinely. It’s the IRS way of putting creditors on notice. 
 
You might also find a private debt collector acting for the IRS. The 5-year spending bill added increased authorization for private IRS collectors. For some tax debts, the law requires—rather than permits—private collectors. National Taxpayer Advocate Nina Olson wrote a letter urging Congress not to allow private collectors. But Congress wants more back tax money collected, and the President signed it into law.
 
Private collectors usually contact you by letter, and then telephone to request full payment. If you cannot pay in full, collectors offers an installment plan for up to five years. If you can’t pay over five years, the collector asks for financial detail. There is considerable worry about having taxpayer financial data in private hands
 
Private collectors cannot accept payments, so do not pay them directly. Plus, the Fair Debt Collection Practices Act applies to private collectors. This is the same law that applies to collectors in other circumstances. Still, there is alot of angst, particularly where the IRS is actually required to use private collectors.
 
The law now requires that three conditions are met. First, ask if the tax bill is not being collected because of a lack of IRS resources or the IRS’s inability to locate the taxpayer. Second, has more than 1/3 of the statute of limitations expired, with no IRS employee assigned to collect it. Finally, if the tax bill has been assigned for collection, but more than a year has passed without any interaction. If these three conditions are satisfied, expect a debt collector.
 
Conversely, some tax bills cannot go to private collectors, as where:
 
There is a pending or active offer-in-compromise or installment agreement;
It is an innocent spouse case;
The taxpayer is deceased, under age 18, in a designated combat zone, or is a victim of identity theft;
The taxpayer is under IRS audit, in litigation, criminal investigation, or levy; or
The taxpayer has gone to IRS Appeals.
 
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Well this notice really riled me up.  First he scares everybody, then he wants $500 to do a simple tax return.  You can do your own simple tax return with TurboTax for about $30.  File your tax return and pay your taxes people, and you don't have to worry about any of this.  People who think they can hide from the IRS by moving to Panama are fools.

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Also, this information is not spam. I have read the news articles about this new power of the I.R.S.

Also, many people have taxes that are beyond the power of Turbo Tax. For those people they pay for professional help.

So, Judy and Keith, did you both get up on the wrong side of bed this morning?

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9 minutes ago, Penny said:

Also, this information is not spam. I have read the news articles about this new power of the I.R.S.

Also, many people have taxes that are beyond the power of Turbo Tax. For those people they pay for professional help.

So, Judy and Keith, did you both get up on the wrong side of bed this morning?

The key word in his post was "simple".  He wants $500 to do a simple tax return.  TurboTax does those easily and cheaply. 

Not the wrong side of the bed.  I don't like people who try to scare other people into spending money they don't need to spend.

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3 hours ago, Penny said:

Also, this information is not spam. I have read the news articles about this new power of the I.R.S.

Also, many people have taxes that are beyond the power of Turbo Tax. For those people they pay for professional help.

So, Judy and Keith, did you both get up on the wrong side of bed this morning?

Maybe it's because I feel an ad for a tax accountant in Florida isn't really community news.

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3 hours ago, Penny said:

I believe the Canadian government has long had the power to take away a passport if the holder owes money to the government (i.e., taxes, child support, etc).

Canadian passports can be refused, revoked, cancelled or suspended for a number of things but not for unpaid taxes.

In Canada deadbeat dads who are delinquent in child support can lose their privilege to travel. Same deal in Costa Rica.

"A person who fails to pay child support or alimony can be subject to the Family Orders and Agreements Enforcement Assistant Act". Under this Act, the Minister of CIC must refuse passport services to individuals subject to that Act and suspend any current passports."

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Heck, I can't even file a return with the IRS.  And I am amazed by the level of wealth among my Boquete expat friends and acquaintances. 

I tried filing a return my first year here, but the EFS (Electronic Filing System) ignored me without comment - I was actually rejected and ignored by the IRS. I was sooo depressed!

(Apparently those who live on a modest to moderate Social Security income, and have less than $10,000 additional income, cannot even submit a return electronically.) 

La vida es buena en Boquete!

Edited by David van Harn
Minor edits
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I have never filed electronically.  I always mailed the forms in.  This year I want to file electronically, but I can't seem to get the IRS PIN number.  It keeps rejecting the info I put in.  Has anybody else managed to get one?  Any tips?  I entered the same info that was on the 2014 form.

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46 minutes ago, JudyS said:

I tried to access the IRS pin site through TurboTax.  I put in all the information, but it keeps rejecting it and won't give me a pin for e-filing.  Were you able to get a pin?

That is the core of my story Judy - the Intuit/TurboTax system didn't tell me why they my e-filing attempt was rejected.  It took a lot of Google searching to find out that my income was under the threshold for e-filing. I only had my SS and no "wages" income.  I wasn't issued a pin - and no reason was given. 

From the Intuit/TurboTax website: 

Quote

When seniors must file

If you are unmarried and at least 65 years of age, then you must file an income tax return if your gross income is $11,850 or more. However, if you live on Social Security benefits, you don't include this in gross income. If this is the only income you receive, then your gross income equals zero, and you don't have to file a federal income tax return. But if you do earn other income that is not tax-exempt, then each year you must determine whether the total exceeds $11,850. If you are married and file a joint return with a spouse who is also 65 or older, you must file a return if your combined gross income is $23,100 or more. If your spouse is under 65 years old, then the threshold amount decreases to $21,850. Keep in mind that these income thresholds only apply to the 2015 tax year, and generally increase slightly each year.

When to include Social Security in gross income

There are certain situations when seniors must include their Social Security benefits in gross income. If you are married but file a separate tax return and live with your spouse at any time during the year, then all of your Social Security benefits are considered gross income which may require you to file a tax return. In addition, a portion of your Social Security benefits are included in gross income, regardless of your filing status, in any year the sum of half your Social Security plus all other income, including tax-exempt interest, exceeds $25,000 or $32,000 if you are married filing jointly.

 

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2 hours ago, David van Harn said:

That is the core of my story Judy - the Intuit/TurboTax system didn't tell me why they my e-filing attempt was rejected.  It took a lot of Google searching to find out that my income was under the threshold for e-filing. I only had my SS and no "wages" income.  I wasn't issued a pin - and no reason was given. 

From the Intuit/TurboTax website: 

 

That's not me.  I owe the IRS money.

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6 hours ago, JudyS said:

I tried to access the IRS pin site through TurboTax.  I put in all the information, but it keeps rejecting it and won't give me a pin for e-filing.  Were you able to get a pin?

I haven't done my taxes this year, but TurboTax didn't ask for a PIN number last year.

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On 1/30/2016 at 7:12 PM, Bonnie said:

I haven't done my taxes this year, but TurboTax didn't ask for a PIN number last year.

There is another option for e-filing with TurboTax that doesn't require an IRS PIN number.  It uses the adjusted gross income from your last year's return.

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