US Passport Application, Social Security Number and Expat Taxes

By Expat News

The US passport is one of the items that American expats living abroad cannot live without. It is a federal crime in the United States to enter or leave the country using anything other your valid US passport if you are a citizen, even when you have other nationalities. Renewing a US passport had never been an issue for domestic taxpayers, American expatriates and dual citizens until January 1, 2016. However, there is a new turn in the process of applying for US passport. It is a well-known fact that the Department of State is required to report the social security number (SSN) of a passport applicant to the IRS. The intensifying pressure to find undisclosed offshore accounts and acts of tax evasion on US expat taxes has brought the Department of State and the IRS closer. The Department of State might be another source of information about delinquent U.S. citizens who failed to file a tax return and FBARs.

US Passport Application Process

The current process of US passport renewal requires all American expatriates to provide the Social Security Number (SSN). The requirement had originally been enacted in 1986, however, the IRS postponed to put it into effect for a long time until now. Recently the US Treasury and the Department of State has joined forces in fighting the offshore tax evasion.

In January 2012 the IRS (Internal Revenue Service) decided to withdraw the old Regulations adopted 1986 but the IRS has finally finalized the final Regulations in regards to the US passport application. The State Department must provide a social security number (SSN) of US passport applicant as well as the foreign residence of American expatriates. This fact is a worrisome issue for American expats who are behind on US expat taxes.

Can American expatriates refuse to provide a SSN as a part of US passport application?

The State Department must report the identifying information of American taxpayers who refused to provide a social security number (SSN) to the IRS. Per this information, the IRS will proceed with its internal investigation to uncover any tax compliance violation on US expat taxes.

Also, effective January 1, 2016, the State Department can deny a passport application if an applicant fails to provide a Social Security Number or s/he provided an invalid SSN and acted intentionally, willfully, negligently or recklessly. The latest development is a part of FAST (Fixing America’s Surface Transportation) Act that was passed by the U.S. Congress on Dec 3, 2015. Consequently, it was signed into law by President Obama on Dec 4, 2015.

The second provision of the FAST Act is that the Secretary of State can revoke the passport of US taxpayers with the tax debt in excess of $50,000. This amount is indexed for inflation and includes any interest and penalties.

How to avoid the denial of US Passport Application?

When you are filling out the application for yourself, children or other family members, it is essential that you check carefully that you have entered the correct SSN for each one.

Congress has not offered their own interpretation of “reckless” making it plausible for your passport application to be denied for a simple error such as inverting the last two digits of your SSN. Even in a case where the error was not immediately discovered, your passport could be revoked by the State Department once it is brought to the attention of the IRS.

American expats should not wait any longer and become compliant in regards to US expat taxes. The FBARs penalties can result not only in civil but also criminal prosecution. Although, many American expatriates might not owe any US expat taxes after filing a US tax return, they still have to file a US tax return to claim any exclusions, deductions and exemptions. There are several options that American expats can choose to become complaint. Some people go under the Offshore Voluntary Disclosure Program. This program is beneficial for people who might face a criminal prosecution. Some delinquent American expatriates choose a “quiet disclosure”. This option has its own flaws and must be reviewed carefully.

The third option is the new IRS streamlined program for Americans living abroad since 2009. US taxpayers living abroad can file through this program if their failure to file was non-willful. The appropriate course of action must be carefully reviewed with an expat tax CPA that provides international tax services.

International tax experts at Artio Partners are here to help you.