Table of Contents
Enforcement of CBT
One of the main fears of US expats learning about US taxation of nonresident citizens is that the IRS will drain their local bank accounts and force them to pay bankrupting penalties for failure to comply. The purpose of this page is to gather evidence on the reality of IRS enforcement.
One of the main fears that people express is that the IRS will force their bank to pay an outstanding tax liability. The reality
This section is for gathering statistics on the level of compliance.
This section is for outlining how the IRS collections process works.
There are five US tax treaties with mutual collection provisions, and none of these countries will assist in collecting US taxes accrued while the taxpayer was also a citizen of that other country. 1) Furthermore, while the US has ratified the original OECD Convention on Mutual Assistance in Tax Matters, the US Senate included a reservation against assisting other countries with collection,2) so the US is unable to use that Convention to get collection assistance from other signatories. In 2015 Congress added a provision to the FAST Act3) that allowed the IRS to work with the Department of State to deny or revoke US passports of individuals with “seriously delinquent tax debt.”4) While passport denial will be a problem for those with US citizenship only, dual citizens will only be affected if they wish to travel to the US.5) The only other tool available to collect from taxpayers with no US assets is the ability to prevent a delinquent taxpayer from leaving the US,6) which requires that the taxpayer be physically present in the US in the first place. The combination of lack of knowledge by US emigrants of their US tax obligations and the inability of the IRS to assess or collect tax from assets outside of the US meant that a large proportion of nonresident US taxpayers were noncompliant before the advent of FATCA.7) There is little evidence that FATCA has made much difference in the rate of compliance for these taxpayers, with falling numbers of returns filed from outside the US,8) which is probably closely related to a decline in the number of US military personnel stationed overseas.9)
For a discussion of treaties with mutual collection procedures see http://isaacbrocksociety.ca/2016/11/01/dual-citizens-of-sweden-france-netherlands-denmark-canada-take-note-your-country-will-not-collect-for-the-u-s/
This section is for gathering information on the rules the IRS must follow to collect, including the ability to levy bank accounts.
Outline Bank Levy process for assets held in the US.
Does FATCA allow my FFI to collect for the IRS? To close my account? (once there's actual information here, cross reference on FATCA page)
A frequent response by the compliance industry is that QI banks must comply with an IRS levy request. This is not in the current QI agreement.