IRS Crackdown on Expat Taxes

This article was published in 7DAYS on December 24th 2015


Four out of five Americans living in the UAE face being subject to a major new crackdown on expats who fail to pay income tax to their government, experts have estimated.

United States citizens living abroad have until January 1 to get their taxes in order or face new penalties.

Congress is attempting to claw back the tax on overseas workers, estimated in 2013 to be worth $100 billion a year.

Unlike some countries, American expats have always had to pay tax in whichever country they work, but many avoid doing so.

Anyone with $10,000 or more in a foreign bank account is liable and those with more than $50,000 outstanding - described as “seriously delinquent” tax debt - could be blocked from receiving new passports by the State Department. It will also, controversially, be allowed to rescind existing passports.

Andrew Landin, Managing Director of UAE based Expat US Tax, estimated that the majority of American expats in the country are not paying up. He told 7DAYS: “Based on global tax data, the number of US citizens in the UAE who don’t file tax returns could be as high as 40,000 out of the 50,000 living here.”

The firm currently has 2000 clients who use the company’s services, which only caters to Americans, to file their US taxes.

Other auditing firms listed by the US Consulate told 7DAYS that the majority of American expats are not even registered with the IRS, the US government agency to whom all citizens, living or working abroad, need to file their taxes.

Nayes Sakran, the owner of auditing firm Sakran, said: “This is a big issue in the UAE. I know many Americans here who were born in the US but moved to the Middle East and don’t bother at all with filing taxes. They feel as if they have nothing to do with the government anymore because they’ve lived out of the US for so long. “At most we’ve had 35 clients who did want to file their taxes and most of them weren’t registered with the IRS.” The suggestion that a citizen’s passport could be seized has been controversial in the US.

Stephanie Sutherland, 42, an American expat living in Dubai, said she and her husband do file their taxes every year, however, she still believes the new law is a “scare tactic”. She said: “They can’t revoke someone’s passport like that. “They can’t just make us stateless. We’re United States citizens. “I think it’s mostly laziness as to why Americans are not filing their taxes here. They’ve been out of the US for so long, they just don’t bother.”

Another American, 39-year-old Brandon Smith, said he does his taxes, however has “many friends” who do not. He said: “It’s common here. If they’ve been out of the States for many years, they feel as if they don’t owe anything to the government.” According to the Wall Street Journal, Tigta, the US tax watchdog, released a report in September detailing how the IRS sent 855,000 tax notices to expats last year - but suggested many never made it to their recipients. “Current IRS processes for addressing international mail issues are ineffective or non-existent”, it said, suggesting many have no idea if or what they owe the government.

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