The Internal Revenue Service is gearing up to expand collections from international taxpayers.

Article from the Wall Street Journal of October 1, 2014:

“The Internal Revenue Service needs to do more to collect delinquent taxes from international taxpayers, according to a report released by the Treasury Inspector General for Tax Administration, a bureau that is responsible for overseeing the IRS.  The Tigta study focused mainly on collections from individuals and small businesses based abroad.

According to the report, ineffective management oversight has contributed to weakness in the IRS’s international collection program. In addition, the study found that the IRS doesn’t have an effective way to select the best cases to pursue, nor does it have reliable statistics on the rate of noncompliance by international taxpayers.

One tool the IRS has used to help collect delinquent taxes from Americans living abroad and other international taxpayers is called Customs Hold: The IRS can ask that the name of a delinquent taxpayer be entered on a list maintained by the Department of Homeland Security. When taxpayers’ names are on the list, Customs officials can stop them upon entry into the U.S. to ask for contact information during their stay, so that the IRS can attempt to collect taxes owed.

The IRS hasn’t assessed how effective Customs Hold is as an enforcement tool, the Tigta report says. According to the report, there are about 1,700 names on the current list, which includes both resident and nonresident U.S. taxpayers. International taxpayers owe about $1.1 billion of the total $1.7 billion in delinquent tax payments associated with people on the list, it added.

The U.S. State Department estimates that 7.8 million U.S. citizens live abroad, which doesn’t include green-card holders who owe U.S. taxes.  Unlike other developed nations, the U.S. taxes its citizens on income they earn anywhere in the world. The rule dates to the Civil War.

In its response to the Tigta report, the IRS noted that as a result of its widely-publicized offshore limited-amnesty programs, more than 45,000 taxpayers have voluntarily come into compliance over the past five years, paying some $6.5 billion in taxes, penalties and interest.

In addition, the IRS said it is looking at realigning collection-related operations within the agency’s Small Business and Self-Employed Division, revising guidance, and making personnel changes.”