IRS Promises More Enforcement Of Foreign Nationals In The United States


A newly re-funded IRS is promising more scrutiny on non-U.S. citizens over taxes. Protecting yourself in this new environment means knowing American tax rules and proactively getting the right help.

Foreign nationals living and working in the U.S. may soon be in the crosshairs of a re-energized Internal Revenue Service.

A representative of the IRS Office of Chief Counsel reportedly told an audience at a recent American Bar Association Tax Section conference that compliance among foreign nationals in the U.S. will be a priority and focus of the IRS.

This comes on the heels of the tax agency getting some $80 billion from the landmark U.S. Inflation Reduction Act signed into law last August. The IRS will receive the money over a decade, with a major portion of the funds earmarked for enforcement (and hiring as many as 87,000 new agents).

That number may be deceptive – heavy attrition in personnel and many past years of underfunding may mean the agency mostly replaces what it’s lost – but the IRS has still pledged sharper scrutiny on rich tax cheatscrypto investors and others to close America’s huge gap in tax collection.

Special problems – and penalties

Common tax-filing errors for non-U.S. citizens don’t always differ from those of American citizen taxpayers, including using an incorrect filing status, incorrectly claiming tax credits or underreporting income. But tax-compliance factors special to non-Americans include:

  • Taxation of income sources can be more complicated.
  • Non-U.S. citizens not in compliance with American tax laws face a variety of special penalties. Failing to properly report taxable income could block obtaining immigration status in the United States, for instance, and even lead to deportation.
  • Tax preparers are unregulated in the United States – no government license is required to practice. Non-citizens often don’t know much about American tax law and are a frequent target of unscrupulous tax preparers.
  • Non-citizens often don’t know about IRS voluntary disclosure programs to amend returns or correct past filing errors or about IRS payment options for tax debt, including installment plans and, in rare cases, offers in compromise.

Have a question? Contact Alicea Castellanos.

Alicea Castellanos is the CEO and Founder of Global Taxes LLC. Alicea provides personalized U.S. tax advisory and compliance services to high net worth families and their advisors. Prior to forming Global Taxes, Alicea founded and oversaw operations at a boutique tax firm, worked at a prestigious global law firm and CPA firm.

Alicea specializes in U.S. tax planning and compliance for non-U.S. families with global wealth and asset protection structures which include non-U.S. trusts, estates and foundations that have a U.S. connection. She also specializes in foreign investment in U.S. real estate property, and other U.S. assets, pre-immigration tax planning, U.S. expatriation matters, U.S. persons in receipt of foreign gifts and inheritances, foreign accounts and assets compliance, offshore voluntary disclosures/tax amnesties, FATCA registration, and foreign companies wanting to do business in the U.S.

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1 comment on “IRS Promises More Enforcement Of Foreign Nationals In The United States”

  • I was curious about the statement “Foreign nationals living and working in the U.S. may soon be in the crosshairs of a re-energized Internal Revenue Service”. I searched and found another article:

    which includes:
    “At a recent American Bar Association Tax Section conference, Audrey Morris from the IRS Office of Chief Counsel (Small Business/Self-Employed Division) publicly stated that tax compliance among foreign nationals living and working in the United States also will be a priority and focus of the IRS’s new funding.

    We have reported extensively about the re-funding of the IRS. (See here and here for example.) There are special considerations for non-US citizens who are not in compliance with US tax laws. For example, failing to properly report taxable income could be a bar or impediment to obtaining immigration status in the United States.”
    Properly interpreted this suggests increased tax enforcement on individuals who (1) are US tax residents because they meet the “substantial presence test”; and and (2) may or may not have the right to work in the USA. In other words, this suggests tax enforcement on many individuals present in the USA without legal status AKS the “undocumented”.

    I suggest that those who found this article interesting also read Professor Francine Lipman’s “Taxing Undocumented Immigrants: Separate, Unequal and Without Representation”.

    The abstract to the article includes:

    Francine J. Lipman
    University of Nevada, Las Vegas – William S. Boyd School of Law

    Americans believe that undocumented immigrants are exploiting the United States’ economy. The widespread belief is that illegal aliens cost more in government services than they contribute to the economy. This belief is undeniably false. [E]very empirical study of illegals’ economic impact demonstrates the opposite . . .: undocumenteds actually contribute more to public coffers in taxes than they cost in social services. Moreover, undocumented immigrants contribute to the U.S. economy through their investments and consumption of goods and services; filling of millions of essential worker positions resulting in subsidiary job creation, increased productivity and lower costs of goods and services; and unrequited contributions to Social Security, Medicare and unemployment insurance programs. Eighty-five percent of eminent economists surveyed have concluded that undocumented immigrants have had a positive (seventy-four percent) or neutral (eleven percent) impact on the U.S. economy.

    Undocumented immigrants, like all U.S. citizens and residents, are required to pay taxes. Despite the historic and strong American opposition to taxation without representation, undocumented immigrants (except in rare and unusual cases) have not enjoyed the right to vote on any local, state or federal tax or other matter for almost eighty years. Nevertheless, each year undocumented immigrants add billions of dollars in sales, excise, property, income and payroll taxes, including Social Security, Medicare and unemployment taxes, to federal, state and local coffers. Hundreds of thousands of undocumented immigrants go out of their way to file annual federal and state income tax returns.

    Yet undocumented immigrants are barred from almost all government benefits, including food stamps, Temporary Assistance for Needy Families, Medicaid, federal housing programs, Supplemental Security Income, Unemployment Insurance, Social Security, Medicare, and the earned income tax credit (EITC). Generally, the only benefits federally required for undocumented immigrants are emergency medical care, subject to financial and category eligibility, and elementary and secondary public education. Many undocumented immigrants will not even access these few critical government services because of their ever-present fear of government officials and deportation.

    Undocumented immigrants living in the United States are subject to the same income tax laws as documented immigrants and U.S. citizens. However, because of their status most unauthorized workers pay a higher effective tax rate than similarly situated documented or U.S. citizens. Yet, these workers and their families use fewer government services than similarly situated documented immigrants or U.S. citizens. Moreover, unauthorized workers have been denied remedies by the U.S. Supreme Court under the National Labor Relations Act and may be challenged to receive protection under wage and hour, anti-discrimination and workers’ compensation laws. As a result, undocumented immigrants provide a fiscal windfall and may be the most fiscally beneficial of all immigrants.

    Despite their net positive contribution to public coffers, hundreds of thousands of immigrants enter the U.S. each year without documents because of impracticable quota and labor certification requirements. These immigration restrictions combined with the additional tax or tariff on undocumented immigrants are inconsistent with economically efficient immigration policy. Moreover, the high effective tax rate imposed on the poorest undocumented working families relative to their less unfortunate friends and neighbors is inconsistent with fundamental tax policy. This Article describes and analyzes the separate, unequal and unrepresented federal taxation of undocumented immigrants.

    Bottom line: The “undocumented” (like Americans Abroad” are taxed more punitively than US residents and receive far less for their tax dollars!

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