Are you a U.S. citizen or green card holder living overseas? Did you know that the U.S. is one of the few countries in the world that taxes based on citizenship rather than residency? U.S. citizens and green card holders are required to file annual U.S. income tax returns, reporting worldwide income and gains, no matter where they live in the world.
Global Tax Network (GTN) explains the ramifications on the FAST Act, which was signed into law on December 4, 2015. The IRS can notify the State Department if there is a U.S. citizen that owes more than $50,000 in federal tax, penalties and interest.
Penalty for not paying up? Losing your passport.
The law reinforces the importance of careful attention to US tax compliance, including timely filing of tax returns, compliance with foreign financial asset and bank account reporting, proper reporting of income, and timely payments of balances due. It is also extremely important for taxpayers to keep their addresses current with the IRS, so that any tax notices are received and resolved promptly. These steps will reduce the risk of deficiency notices that could ultimately cause not only financial issues, but the denial or revocation of a U.S. passport.If you only recently became aware of your filing obligations, the good news is that you're not alone and there is currently a special procedure to get delinquent taxpayers back on track.
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