The US Congress sometimes discovers that the Internal Revenue Service (IRS), the agency created to collect taxes, is mistreating taxpayers. In 1979, Congress created the Office of the Taxpayer Ombudsman to advocate for taxpayers’ rights within the IRS. In 1996, this office was renamed the Taxpayer Advocate Service (TAS).
The Taxpayer Advocate Service (TAS)
The TAS is an independent organization within the Internal Revenue Service (IRS). It advocates for taxpayer rights and helps resolve tax-related issues that taxpayers have been unable to resolve through normal IRS channels.
The Taxpayer Advocate Service has some autonomy but the TAS is not fully independent from the IRS. Taxpayers may not always get the fully unbiased perspective they expect from the TAS.
The Taxpayer Advocate Service Report from January 2012
One of the TAS’s responsibilities is to issue an annual report to Congress. The latest report criticizes the IRS’s efforts to enforce international tax laws. It focuses on the IRS’s Offshore Voluntary Disclosure Program (OVDP), saying the program may have undermined trust in the IRS.
Penalties for Unreported Foreign Accounts
The report explains that taxpayers can be fined up to $10,000 per year for not properly reporting a foreign bank account. But the IRS strongly encouraged people to enter the OVDP program, even if they just made a small mistake. In the OVDP, taxpayers had to pay much higher penalties than they would have otherwise.
Complexity of Tax Rules for Overseas Taxpayers
The report also discusses the overwhelming complexity of tax rules for Americans living abroad. The IRS has 16 publications on international tax issues, totaling over 7,000 pages of instructions. This makes it very difficult for taxpayers to stay compliant.
Recommendations and Expatriation
The report recommends that the IRS provide more resources to help taxpayers comply with the rules. But it does not suggest simplifying the rules themselves. As a result, many Americans are choosing to give up their US citizenship to avoid the complex tax requirements.
The Importance of Getting a Second Citizenship Before You Expatriate
Although it’s not legally required, a second passport from another country is strongly recommended before you give up your US citizenship. This is true no matter if you renounce or relinquish.
Without a second citizenship, the act of expatriating will render you stateless. You won’t have the right to legally live anywhere.
For an entertaining, but romanticized, view of statelessness, watch The Terminal. This movie is based on the true account of Mehran Karimi Nasseri. After being expelled from Iran, he spent 18 years living in a departure lounge of the Charles de Gaulle Airport in Paris until he finally qualified for refugee status in France.
How to Get a Second Passport: 7 Legal Ways
Thinking about a second passport? There are just seven official (legal) ways to get one. Find out which one is the best option for you: How to get a second passport.
Need Help?
We can assist in every phase of giving up your US citizenship or long-term residence. This includes helping you get a second passport before giving up US citizenship.
And if you’re not ready to expatriate, we can help you take advantage of tax breaks in the Tax Code that apply to US citizens and permanent residents living overseas.
Schedule a free no-obligation consultation with a Nestmann Associate to see if expatriation is right for you.
