The Tax Hazards of a U.S. Passport
by P. T. Freeman
Recently, I was having a conversation with a friend of mine who is a journalist here in the Caribbean. While she grew up in the islands, she was born in Florida. During my friend’s early childhood, her mother divorced and relocated to the Caribbean. Subsequently, her mother remarried and the husband formally adopted my friend as his legal daughter.
In the course of our conversation, my friend mentioned that she had just re-discovered her long-lost U.S. passport in a drawer at her mother’s home. It had expired a few years ago. In the intervening years, she had visited the United States several times, but using another passport. This is a serious violation of U.S. law, because U.S. citizens must always use their U.S. passport to cross U.S. borders. However, because her stepfather’s last name appears on my friend’s Caribbean passport, no “alarm bells” were ever triggered when she crossed a U.S. border.
But, this was just the beginning of my friend’s problems. I asked her is she was still filing U.S. tax returns. “No,” she replied. “I left the United States when I was a child. Why would I have to file tax returns there when I’ve never worked there or even lived there since childhood?”
I patiently explained that the United States requires its citizens to pay tax on their worldwide income, no matter where they live. I also told her that she possibly faced a long prison sentence for not disclosing each year the existence of all bank accounts she held outside the United States with an aggregate value exceeding $10,000. And I mentioned that while she could make an appointment to give up her U.S. passport at a local U.S. consulate, she would continue to be subject to these taxes and criminal sanctions for all past years. She could be arrested and taken into custody anytime she visits the United States!
Her response was a mixture of horror and disbelief. After a few minutes, she replied “well, screw ’em! They can keep their damn passport.”