— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) March 30, 2016
Yesterday I was forwarded an email which originated from the U.S. Consulate in Toronto. The purpose of the email (included at the end of this post) was to give notice of U.S. tax obligations for U.S. citizens living outside the United States. In other words, the State Department is assisting the IRS by notifying Americans abroad of their U.S. tax filing obligations. Put another way, this email represents:
“Tax Education Outreach” from the IRS delivered by the State Department”
I do NOT recall this in previous years. That said, this email notification is extremely significant. It means that the IRS can argue that those who received this email may well have had notice that they were required to file U.S. tax returns. Over time, this will increase awareness of U.S. tax filing obligations. The greater the increase in awareness of U.S. tax filing obligations, the harder it will be to claim ignorance of those obligations. (This is in addition to the “Educational Outreach” coming in the form of FATCA letters from your local bank and your friendly journalists. In both cases, you are being asked to consider the question of: “Are you or have you even been an American citizen?“) Although, this is NOT an immediate problem, it seems logical that sooner or later it will become more difficult for Americans abroad to claim ignorance of their U.S. tax filing obligations. This may have implications for coming into U.S. tax compliance.
Q. Who would have received this email from the U.S. consulate?
A. Anybody who is on the U.S. Consulate email list.
Q. Who would be on the U.S. Consulate email list?
A. It would include almost anybody who has applied for a U.S. passport.
To put it simply:
One who applies for a U.S. passport is now putting oneself in a position where one will be told about U.S. tax filing obligations. Since most Americans abroad need a U.S. passport, it stands to reason that those who apply for a U.S. passport are creating a situation where they will be told about U.S. “taxation based citizenship”. You can see where this is going.
This appears to be the next step in the progression that includes …