IRS Tax Lien and American Expatriates

By Expat News

Many American expatriates with delinquent expat tax returns live in a fear. Earlier we mentioned the ways that the IRS can find US citizens and green card holders living abroad. Americans can face substantial penalties for a failure to file a tax return on US expat taxes and potential IRS tax lien. The issue is whether the IRS actually can put a lien on the foreign assets of American expatriates.

This is an email from one of our clients, American expatriates living abroad. “I haven’t filed US expatriate tax returns since 2004. I own a house in Ireland. Does it mean that the IRS will take my house if I owe any tax? What is the IRS tax lien?”

Let’s review the procedure.

What is the general procedure of the IRS collection process?

As soon as the IRS determines the amount of US expat taxes due, the IRS sends a notice to a taxpayer. The payment is due within 60 days. If American expatriates fail to make a payment on time, the IRS will put a federal tax lien on a property. The property must be owned by the taxpayer and it can be located anywhere in the world. The issue is that the IRS cannot legally take administrative actions against a foreign property or force the IRS tax lien against American expatriates unless there is a treaty provision.

The IRS currently has bilateral agreements with 64 countries. However, a treaty must have a collection assistance provision before the IRS can take any action against a foreign property owned by American expatriates. Five countries have extensive collection provisions: France, Denmark, Sweden, Canada and Netherlands. Although, these provisions are quite detailed, they still have a lot of ambiguities and leave a lot of room for interpretation. 24 bilateral agreements have a limited collection provision so the IRS tax lien can be hardly enforceable.

Court might be another way for the IRS to force a tax lien against American expatriates. Using a judicial system is quite easy if the assets are located in the USA. The challenge is that a foreign court is usually not willing to collect taxes that will benefit another country. Moreover, there are financial and tax policy differences between the USA and other countries.

What is the future of the IRS tax lien imposed on foreign assets of US expatriates?

Globalization and FATCA are changing the international tax system. A growing number of countries expressed an interest in implementing FATCA and in introducing measures to fight tax evasion. International tax standards of information exchange become a reality across different parts of the world. More and more foreign financial institutions requested to sign an intergovernmental agreement to avoid any disruption to financial system. The latest FATCA requests were sent by the Caribbean Community and Chilean Association of Banks and Financial Institutions. Higher transparency will lead to new collection process enforcement among different countries. The IRS tax lien on foreign assets can become a reality in the nearest future.


American expatriates with past due tax returns should not wait any longer. The IRS introduced a streamlined program for American expatriates with simple tax returns. The penalties for a failure to file the FBARs, FATCA and other forms like foreign trust, foreign partnership, controlled foreign corporation are significant. U.S. citizens and green card holders are advised to contact an expat tax CPA. International tax experts at Artio Partners are here to help you.