Are You Going to be Affected by the Passing of the FAST Act?
Ines Zemelman, EA Mar-01-2016
The new FAST Act may cause problems for US Citizens living both stateside and overseas.
The FAST (Fixing America’s Surface Transportation) Act was passed by Congress on December 3, and President Obama signed the act into law on December 4. There are two provisions in the FAST Act that could affect US Citizens on a greater scale than FATCA.
Under one provision, the US Secretary of State has the power to deny or revoke a passport held by an American Citizen who has become severely delinquent.
One of the two potentially harmful provisions in the FAST Act is giving the US Secretary of State absolute control over who can obtain or maintain a US passport. In the case of serious tax delinquency, your passport could be denied or revoked. The IRS considers you seriously delinquent if your tax debt is greater than $50K. This includes federal taxes, penalties and interest. This number is changed each year to keep up with inflation.
The second provision gives the State Department the power to deny an application if there is an error with an SSN (Social Security Number).
Under another provision, the State Department has authorization to refuse a passport in the case that an applicant either fails to put a SSN on the application or reports an invalid SSN. The passport application can be revoked or your current passport could be revoked if an incorrect SSN was provided intentionally, negligently, recklessly, or willfully.
There are a few ways you can avoid being negatively impacted by these provisions. The first of which is to make sure that you are current on your tax filing obligations and that your tax return is filled out correctly.
A US expat tax return can be extremely complicated. If you have any questions about how to file your US income tax return, you should seek help from a qualified US expat tax professional. If you are a US Taxpayer residing in a foreign country or you have foreign-sourced income or foreign assets, don’t make the mistake of thinking that filing a tax return to report these assets is easy; it’s not. You are encouraged to make sure that all of your tax forms and your FBAR are filled out completely and accurately.
There is an entire range of circumstances that could make the process of filing your US income tax return even more complicated than it already is.
If any of the following scenarios applies to you, your tax return could be even more complicated than you’re used to:
- You have one or more foreign pensions
- You have foreign investment funds
- You are the owner (or partial owner) of a foreign entity, such as a corporation, trust, partnership, etc
- You have signature authority on a foreign financial account
- You received an inheritance from a foreign country
- You are receiving employer-sponsored expat benefits
- You own certain stock options
- Your foreign earned income his higher than $100,800 per year
- You have foreign financial accounts for which the total balance exceeds $10K
- You have foreign assets (financial, real property, etc) worth more than $50K
- You have a foreign spouse
- You maintain a foreign life insurance plan
- You hold a foreign mortgage
- You earned income from selling or renting real estate in a foreign country
- You have self-employment income
There could be another scenario not listed here that applies to you and would make your US expat tax return abnormally complicated. Also, all of these items could cause you to incur debt and penalties in excess of $50K if you report your FBAR or tax return incorrectly. This is why it’s so important to have help from a tax professional who is well-versed on any scenarios that apply to your individual case.
Another step you can take to avoid falling prey to having your passport revoked or you application denied is to make sure you fill out your passport application with caution.
In the United States, leaving the country without a valid US passport is a federal crime. This is true even if you hold one or more foreign passports. When you fill out passport applications for yourself, family members, children, etc, make sure you double check the SSNs you entered.
Unfortunately, the term ‘reckless’ has not been defined. Is it reckless to accidently invert a couple digits of your SSN? If an individual at the State Department thinks this is a reckless move, then your application could be denied. Assume, now, that your application with an incorrect SSN somehow gets approved. If this is the case, it could be revoked at a later date when the mistake is recognized.