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- Multiple Ways the IRS Can Track You Down
Here at Taxes for Expats, we are frequently asked by expatriates living and working outside of the UnitedStates if the IRS would ever be able to discover that their annual US expat tax returns are not filed. Thesimple answer to this question is: Yes, the IRS will be able to track you down if you are not filingyour US expat tax return annualy.
Now we will get into the ways in which the IRS will be able to identify you as a delinquent taxpayer andhold you accountable for your tax liability:
- You apply for Social Security or pension benefits;
- You open a US based financial account;
- You inherit money or assets from parents, grandparents, or others who have passed on;
- You are reported by a whistle-blower; the IRS offers ‘finder fees’ for individuals who report otherindividuals for not paying their income taxes. The highest known whistle-blower fee so far is $104M;
- You renew your passport and are forced to provide your social security number which is, then, sent to theIRS;
- Your foreign income or financial accounts are reported to the IRS due to an information sharing treatyenacted by FATCA;
- You register on the internet in a public domain such as Facebook or Twitter;
- You register the birth of a child born overseas with the US Embassy in your host country;
- You are involved in a marriage, divorce, or some other matter of public record;
- You enter the United States using a foreign passport which indicates that you were born in the US;
- Your name appears on stolen information on foreign financial accounts which are passed on to the IRS;
- Your adult children submit applications to universities or other learning institutions in the UnitedStates and provide information about income and payments;
- You are listed on another’s US expat tax return or foreign business documents which have been shared withthe IRS;
- You are indicated on suspicious activity forms submitted to the IRS (this form is often submitted bybanks, auto dealers, and other institutions which have reason to suspect tax evasion and other suspiciousactivities);
- You are included in information which has been provided to SOCO (Serious Organized Crimes Agency) or theUnited States Treasury Financial Crimes Enforcement Network;
- You are identified via information provided to the IRS or Department of Treasury by an individual takingadvantage of an OVDI (Offshore Voluntary Disclosure Initiative);
- Or you are a member involved in forming a corporation or partnership in a foreign country which requiresyou to identify your ownership as an American Citizen.
The number of countries which share information about US Citizens with the IRS is steadily increasing.Information sharing treaties are helping more countries (not only the United States) to realize more taxrevenue than ever before, and the internet is making it more convenient to share information and track downindividuals who are not filing regular US expat tax returns with the IRS or reporting foreign financialaccounts to the Department of Treasury.
If you have been delinquent with your US expat tax returns to the IRS or have failed to report your foreignbank accounts in excess of $10K to the Department of Treasury and you need help filing back taxes or takingadvantage of the 2012 OVDI while it is still in effect, make sure to get in touch with a USexpat tax professional who can help you resolve your tax issues with as little repercussions aspossible.
As an expert in expatriate tax matters, I bring extensive knowledge and hands-on experience to shed light on the critical aspects of filing US expat tax returns. My understanding is not only theoretical but also grounded in practical scenarios, making me well-equipped to address the concerns raised in the article "Multiple Ways the IRS Can Track You Down." Having navigated the complexities of international taxation, I am well aware of the mechanisms employed by the IRS to identify delinquent taxpayers living abroad.
The article discusses various methods through which the IRS can track down individuals who fail to file their annual US expat tax returns. Let's delve into each concept mentioned:
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Applying for Social Security or Pension Benefits:
- Individuals applying for Social Security or pension benefits may unwittingly disclose their status to the IRS, triggering further scrutiny.
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Opening a US-Based Financial Account:
- Opening a financial account in the US can lead to the IRS detecting your financial activities, as such information is shared.
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Inheriting Money or Assets:
- Inheritance of money or assets from deceased relatives could lead to the IRS becoming aware of your financial situation.
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Whistleblower Reports:
- The IRS incentivizes whistleblowers with finder fees, encouraging individuals to report others for tax evasion, potentially resulting in substantial rewards.
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Passport Renewal:
See AlsoTaxing hidden wealth- Renewing your passport requires providing your social security number, which is then reported to the IRS.
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FATCA Reporting:
- The Foreign Account Tax Compliance Act (FATCA) mandates the reporting of foreign income or financial accounts to the IRS through information-sharing treaties.
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Online Registration:
- Registering on public domains like Facebook or Twitter can expose your identity and trigger IRS scrutiny.
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US Embassy Registration:
- Registering the birth of a child born overseas with the US Embassy can bring your expatriate status to the attention of the IRS.
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Public Records Involvement:
- Involvement in public record events such as marriage, divorce, or other matters can make you identifiable to the IRS.
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Foreign Passport Entry:
- Using a foreign passport indicating US birth upon entry to the United States can prompt IRS attention.
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Stolen Information on Foreign Financial Accounts:
- If your name appears on stolen information related to foreign financial accounts, it may be passed on to the IRS.
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Children's University Applications:
- Adult children submitting applications to US universities may disclose information about family income, attracting IRS scrutiny.
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Inclusion in Others' Tax Returns:
- Being listed on someone else's US expat tax return or foreign business documents shared with the IRS can make you traceable.
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Suspicious Activity Reports:
- Banks, auto dealers, and institutions submitting suspicious activity reports may draw attention to potential tax evasion.
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Information Shared with SOCO or Financial Crimes Enforcement Network:
- Information provided to Serious Organized Crimes Agency (SOCO) or the Financial Crimes Enforcement Network can lead to IRS awareness.
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OVDI Participation:
- Participating in the Offshore Voluntary Disclosure Initiative (OVDI) can result in the disclosure of information to the IRS.
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Formation of Corporations or Partnerships:
- Involvement in forming a corporation or partnership in a foreign country may require disclosing ownership as an American citizen.
The increasing number of countries sharing information with the IRS, facilitated by international treaties, underscores the global effort to enhance tax compliance. As an expert, I emphasize the importance of seeking professional assistance to rectify delinquent tax situations and navigate the evolving landscape of expatriate taxation effectively. If you find yourself in a situation of non-compliance, consulting with a US expat tax professional is crucial to addressing your tax issues with minimal repercussions.
