For all of you working overseas there were two major tax issues that occurred this week that we all need to be aware of.
First, congress passed and President Obama signed into law a new highway funding bill. Included in this bill is a provision that orders the IRS to report to the State Department any Americans who owe $50,000 or more in back taxes, interest, fines and penalties. The State Department is supposed to use this information to deny and/or revoke the passports of anyone on the list. At its most basic provision there is zero recourse or appeal process before the passport is revoked. Of course you can appeal and perhaps get your passport back at some later time. But for now, if the IRS says you owe $50,000 or more, kiss your passport goodbye for at least some period of time.
The second issue at hand is that the Supreme Court refused to hear the case of an United flight attendant, who is an American citizen and based in Hong Kong, who attempted to claim the foreign income exclusion for all of her income. The U.S. tax court ruled in 2013 that all income earned while in international airspace did not qualify as foreign earned income and thus was not eligible for the exclusion. The IRS assessed a 20% negligence penalty on her taxes as well. Since the Supreme Court refused to hear the case, the 2013 ruling of the tax court stands and is now essentially the accepted and undisputed law of the land. The article did not mention how much she owed or what the 20% penalty was, but you can see that with the new passport revocation law, her career could quickly be jeopardy. Even most regional U.S. airlines require a passport for flight crews.
Anyway I only posted this for information. If you are working overseas, or considering working overseas, make sure you hire a well qualified tax specialist who has experience in dealing with Americans who work overseas. Failure to do so may risk your entire career.
Sources:
The Supreme Court Denies Certiorari for USC Taxpayer Who Claimed Foreign Earned Income Exclusion « Tax-Expatriation
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