#524 – The Expat Files: Passport Changes, Tax Risks, and Immigration Strategies

Automatically transcribed from the original recording; names and wording may contain errors.

[00:00] South of the border down Mexico way That's where I fell in love when the stars above came up to play and now as I wander Hello there all you expat wannabes. I'm Johnny Mueller and you're listening to the expat files living in Latin America The show that tells you just what it's like to live work play and or retire down here in Latin America It's a mix of the good the bad the ugly and the great and it's all right here. So let's get started This show will be the first one for 2016 going out on January 1st, which means in exactly a week's time my January 2016 expat insiders seminar will be underway and for you very last-minute types. You can still get in just go to

[00:48] www.the new expat comm click on Johnny's 2016 seminar link to read up on the event and sign up and you know it seems like with a lot of my seminars people sign up at the very last minute sometimes even signing up one day before the event and Though you might think it has to do with a severe case of indecision procrastination or even manana time Nope, some people plan it that way because you see at the very last minute certain airlines offer very special deals and Standby deals so you can save a few hundred bucks though I understand hooking up with those deals is not for the faint of heart in fact I remember one person told me that he got a round-trip ticket from LA for around 400 bucks complete though There were two layovers. I think one in Houston and one in Guadalajara But still 400 bucks compared to the average round trip rate which is around five to six hundred fifty bucks

[01:38] And believe me that extra savings can buy a lot of tropical drinks with little umbrellas in them Not to mention a lot of cases of tequila and who knows how many Cuban cigars that said now for some more Disheartening news from Big Brother that means the US State Department Here's an article that was sent to me by a lot of listeners Entitled the US State Department makes new changes to American passports now You're not much of a traveler and your passport sits as just another ornament along with those 50 or so old cell phone Rechargers in the junk drawer in the kitchen This won't make much difference to you But if your aim is truly to become an expat or just want to get the hell out of Big Brother country once in a while This really will make a difference. It's just another roadblock that the US is putting up to keep their sheep in line

[02:24] Mostly to keep track of US citizens who've been out of the country a long long time It looks like for some of us they think the leash is way too long Then they want to pull it in a little tighter and for this breaking news Let me thank one of my early seminar attendees Rory for sending me the very first blurb on this It starts by saying the heavy hand of the US State Department will be making changes to the supplemental Insert pages for American passports as of January 1st Beginning with the new year the US State Department announced they will no longer be inserting the 24 page Supplement into passports that are almost filled completely with stamps Then it says the decision to discontinue the service was made to enhance the security of the passports and to abide by the

[03:10] International passport standards according to the US State Department The change they said has been in the works for some time and is not related to recent terror attacks But they said related to security factors and general vigilance Hmm. Yeah, right. Then it says back in October 2014 the State Department began issuing 52 page passports for certain applicants outside of the US and beginning the first day of the new year Applicants inside the US will be able to apply for either the 28 page or 52 page passport According to a government statement requests for the additional 24 page inserts for valid US passports will only be accepted till December 2015 so I guess we all miss that window, huh? All right. What does that mean now?

[03:57] If you take a look at your own passport, you'll see if you enter a country You'll have to exit that country So you'll get two stamps and for the next country you enter you'll get an entry in the exit stamp, too So for example, if you're flying from Panama to Cancun Mexico, you'll get four stamps Which will fill one whole passport page each one of those stamps is about a quarter page in size Which means every time you take a trip and come back to or through another country one whole page in your passports used If you have a 28 page passport, that means you can go in and out of 56 countries, right two for each page Nope, that's wrong. You can only go in and out of 40 countries and that's over a period of 10 years That's how long current passports are valid. Oh, and by the way in some of the countries

[04:43] I've been in in South America and Africa and stuff They've got a stamp that takes up half of your passport page So you can only get two stamps on one page cool, huh? and those stamps really tend to use up your pages fast and By the way in most countries if you happen to stay even one day past the usual 90-day tourist visa You'll have to pay a small fine per day usually one to three bucks in Latin America But they'll stamp your passport with a stamp that covers a whole page Saying that you stayed too long and that you're in violation of the visa and all that no big deal But it steals a whole page on your passport. How do I know that? Well, I've been guilty of that myself So even in the best of circumstances if you prorate a 10-year passport You can only on average go in and out of four foreign countries a year

[05:32] So why is that in a 28 page passport? The first seven pages are all filled up with your data and government warnings and other junk You don't actually start getting entrance and exit stamps until page eight now That means and this has happened to me if you end up in for example South America Central America Asia or Africa on a two or three month tour you definitely will fill up that passport or Nearly fill it and have to go to the nearest embassy to get a 28 page insert which you won't be able to get now Instead you'll have to get a brand new passport. Now, of course, there'll be more pages in it They say there'll be 52 pages now but it's really all about checking in so they can find out where you're wiring what you've been up to and if you Remember from a show I did maybe a year or so ago when you apply for that new passport

[06:20] They've added about 25 brand new intrusive questions to the passport application including things like what hospital were you born in? What's the address who was attending when you were born? Where did your parents live at that time? And what was the address you get the idea you practically have to lie or at least fudge a little on stuff like that Because who can remember all that stuff? Maybe your mom or maybe your dad, but you being slightly more advanced than an embryo Certainly don't remember a thing. And if you do it wasn't pleasant after all someone slapped you and then you cried a lot, right? Now the fact is I've spoken to a couple of embassy people myself people on the inside They say that if in the future there's any kind of Necessary roundup to be going on and big brother in the states is looking to lasso people who are out of the country

[07:08] All they've got to do is dig up those passport forms find an error or two And there's gonna be a few obvious ones if you check into it And then as it says on the bottom of the passport form any false statements made on this form can result in fines Imprisonment and revocation of your passport and if you think I'm sounding paranoid here I've heard it from the horse's mouth someone who works right inside an American Consulate Oh and another thing suppose you're stuck in let's say Germany when all your passport pages are used and now that you can't get that insert you have to apply for a new passport You think you're gonna be able to do that in one day two days a week Try three weeks to a month Maybe more depending on holidays and the fact that you have to go online now to get any kind of Consulate appointments to do such things such as apply for a new passport

[07:55] So basically what this new rule is all about is to keep track of all those people those expats who've been out of the country Long long time they want to know where you hang out where you live what you look like now because you'll get some new photos taken Right and by the way when you walk in that embassy you're being captured on about 47 ultra high resolution cameras, too So basically the rope is tightening and it's gonna get worse guess what the next step is gonna be well You might have been reading about this stuff yourself Maybe not the US Consulate guy told me there are two things in the works that will come to pass shortly one National passport or identity card that you have to use when traveling from state to state in the US now He says the public's not gonna like that and no politician is gonna ever bring it up

[08:44] However, when the next big terrorist attack hits within US borders Probably a false flag or a supposed large terrorist attack that was thwarted by homeland security Through their amazing talents and superhuman efforts. That's how the dunderhead media boys will play it anyway That's when the US State Department will throttle the traveling public even more In fact many American morons might actually demand a national ID card for traveling purposes Why for security reasons of course and the second way they'll tighten the news Passports will no longer be issued for 10 years five years will be the limit again for quote National security reasons come on didn't you learn in civics class that all morons and couch potatoes have the right to life liberty

[09:30] And the pursuit of Budweiser or something like that So what's that mean for all you gonna be some wannabes up there for one thing? There's not a lot of time left you've got to get off the fence come down get residency in a foreign country Preferably a third-world Latin country because they are easiest to get residency in at least for now Which will put you on track to getting a second citizenship and passport, but believe me those avenues are closing fast, too Let me give you an example traditionally in most Latin countries you get your temporary residency first you wait a year or two years You get your permanent residency and after five years or so you can apply for citizenship and passport And in many instances you can skip the temporary residency and go right to permanent and save yourself a year or two Now of course every country slightly different

[10:16] But you can count on the fact that when you get your permanent residency most of the time you can get your Citizenship in five years or so However note that not all residency programs lead to a final citizenship and passport Belize is one of the countries that does not allow that and in many Latin countries if you get a pensionnado residency That means you're coming as a retired person Many of those programs do not lead to a permanent citizenship and passport That's the case for example with the pensionnado programs in Panama But listen to this recent development now in the Dominican Republic the DR It used to be quite easy to get your temporary and permanent residency if you were a person from the states or the first world And it led to a passport in five years, however listen to this from a company called TDV immigration an online provider of

[11:04] Citizen and residency opportunities now. I'm not endorsing them I'm just telling you what kind of problems they're having right now with residency and people trying to get passports They're expedited for such things and are running into some problems now By the way if you've been listening to this program for quite a while You know I personally never recommend immigration services over the internet instead I always recommend come down get your boots on the ground and hook up with a local lawyer or tramita door That's what they're called down here tramita door. That would be a paperwork expediter It'll always be much much cheaper than doing anything through a service that's on the net Why because if you find people that do such things on the net especially English speakers Those will be gringos setting up those web pages and expecting their cut and gringo prices for example in Guatemala

[11:50] You go to a Latin lawyer there. You'll pay maybe 1500 to $2,000 to get your Guatemalan residency either temporary or permanent, however I've seen some residency and citizenship Expeditors on the internet like the ones I just mentioned and I see one right here. I'm looking at it right now that charges $8,500 to get Guatemalan residency And of course you'll have to fly down and stop at the immigration office at least twice to sign paperwork and stuff So then you have to add a couple grand and some time off to that charge. You're looking at maybe Minimally ten or twelve thousand bucks, however you come down get your boots on the ground You'll pay fifteen hundred bucks, and then because you're down already. You'll only have to come back one more time So figure it out. You'll save five to seven thousand bucks doing it that way now according to expat eddies

[12:40] He claims depending on your party preferences and peculiarities That kind of extra dough could buy you anywhere from two weeks to a lifetime's worth of umbrella drinks But seriously the money is saved by coming down and getting boots on the ground We'll pay for both of your trips down to Latin America to get that residency stuff done, but where was I oh, yeah Talking about TDV immigration services net provider of residency and citizenship opportunities now Just last month one of their legal operatives what's quoted as saying we've seen countries worldwide Clamping down on allowing foreigners to get residency and citizenship in fact over the last few years The Dominican Republic has gone from requiring a residency to citizenship process of three years to then

[13:26] Changing it to four years then last year seven and now it takes an eight year residency requirement for citizenship, and it looks like sooner or later They'll do away with it all together and when some top immigration lawyers on the island were asked Why is this so they responded? It's all due to pressure from the US government. How do you like that? So what does that mean the US government does not want its sheep to become a residence of foreign countries Especially when that residency process leads to a passport and citizenship Why because with another passport if there's any trouble on the horizon with uncle Sam you can flip him the bird and be on your merry Way, but that's not all TDV immigration sources stated quote. We've seen countries freeze their immigration

[14:14] Naturalization process even in recent months then the spokesman said the only clients our company is currently accepting people who are sure to have success with immigration and naturalization in a foreign land are what you would call extremely wealthy persons and We're presently receiving a flood of millionaire and billionaire clients in the Middle East Practically offering any amount of money if we can get them residency and citizenship outside of the Middle East Unfortunately, he said the demand has exploded and the supply has practically been frozen then he added There are still a few options of foreign residency and naturalization available to the non-wealthy, but I would advise people to proceed Immediately, it seems like the options for middle-class and even upper middle-class people are running out permanently

[15:00] So what does that mean? Well, it's easy to see that in the very near future the wealthy need only apply So once again, what are you waiting for? Meanwhile in a real schizophrenic twist Mexico has announced in all of its media and Spanish language newspapers that it's tightening controls at the American border To stem the tide of so-called US criminal types and the newest surge of North Americans Who've been flooding into Mexico? How about that? Mexican officials have been saying get this it's causing for Mexico a major illegal first world immigrant problem Yeah, right like Mexico couldn't use a reverse brain drain like that So anyway, they're worried now that Americans are staying as undocumented illegals in Mexico

[15:48] Now, of course, you know where that idiotic Mexican government rhetoric sprung from right give you one guess Retaliation against Trump when by the way is very sure US passports concerned if you look at page 7 point 11 it says register with the US Embassy When you're visiting a foreign country for a prolonged stay Traveling to remote or volatile areas or residing overseas Do register with the US Embassy or Consulate by telephone facts or in person or register online through the department's registration home page and travel registration dot states dot gov Etc. Etc. Now, what's my opinion on that? You're gonna be shitting me. What the Well, you don't have to believe me or Tony Soprano

[16:35] But it's pretty much unanimous among free-thinking Intelligent expats that you never go to a US Consulate or embassy unless you absolutely have to now, don't get me wrong There are a lot of expats down here in Latin America and some are lukewarm and brain dead So there is a difference of opinion amongst expats Some do believe every bit of propaganda the u.s. And the u.s. Media Oh vomit's out and some idiot expats will stop in at the US Embassy just to say hey And what kind of people would do such an idiotic thing? Well, if you happen to be down here on some kind of government contract for one For example, if you're an embassy worker or military attache Then you're all in because you're a parasite sucking off the government trough And that's also true If you're one of those brain dead expat flag waivers often found on the gringo tourist trail the type who get

[17:24] Genuinely excited when they cast their absentee ballots for lying crooks up in the states. Yes There are always small cadres of lobotomized expats who love rubbing shoulders at embassy gigs and hoop it up at Republicans and Democrats abroad then of course You've got those do-gooders building solar outhouses for Jesus though You can almost forgive them for flag waving and kissing up to the US like you can forgive an orangutan at the zoo for openly Scratching his privates now Those are the morons that look at us consulates and embassies as they're friendly tether slash lifeline to the US And I'm not talking about the orangutans and reason number four thousand two hundred and twenty six Why being off the gringo tourist trail is the place to be? okay, since we're talking about residency and passports remember a couple weeks ago as mentioning that new law that says if you owe the IRS more

[18:14] Than fifty thousand bucks. They can revoke or block your passport after I hit on that distressing subject I got emails some that put an even nastier twist on it now first Let me mention once again now if you live out of the u.s. For 330 days or more you get that fantastic $100,800 foreign earned income tax exemption in other words if you're making money in a foreign country you get up to $100,800 or that exempt from US federal and state taxes and in some cases you don't even have to pay FICA It's all legal and we explain exactly how to go about that if you come down to the seminar now Because so many long-term expats have taken advantage of that foreign earned income tax

[18:59] Exemption a lot of expats who have paid no taxes year over year just quit filing Why bother to file taxes if you make under that hundred thousand eight hundred dollar limit because you don't have to pay anyway Well, let me read this little excerpt of an email I just received and I'll paraphrase this from an article he sent this is Ralph and he starts by saying Johnny Some tax experts read this new law to mean that the IRS can revoke your passport if you owe back taxes of 50 grand or more or have unfiled tax returns even if you don't owe any money That's because failure to file a return typically results in returns being prepared by the IRS computers on your behalf No human intervention or review is required Let's say you've been living in Latin America a long time and you've been making well under two hundred thousand eight hundred dollar tax

[19:49] Exemption limit and you pay no tax. So you just decide not to file taxes anymore Well oftentimes because you've been in the computer for many years and have been filing and suddenly you don't More often than not an IRS computer will simply print out a report showing that their processes were followed correctly and they'll assess you Estimated taxes thus the computer will say you now owe money No need to prove their case in court get a judgment no order from a judge as required in all other civil offenses No need for the IRS to send you a notice saying they're gonna audit your file or even telephone you the taxpayer To ask for an explanation because it's all done by computer these days If the computer says you owe money your passport can be revoked or refused

[20:36] So let's say you're living abroad and haven't filed your tax return for a year or two or three Because in the past you never had to pay any taxes at all. You fell under the limit Well, here's the rub in some cases and you'll never know which ones IRS computers can generate what are called substitute for returns called SFRs and IRS speak these SFRs are prepared on your behalf using whatever data the computer has based on past returns And who knows what else the SFRs will be prepared with zero deductions for you and zero exemptions or expenses to offset That rate in fact the balance due from a substitute for return SFR is always higher than if you had prepared the tax return yourself

[21:22] and once the SFR is entered into the system a notice is mailed to your last known address informing you of the amount due and if you're out of the country you probably will never respond to that notice because you didn't get it and then after some months another notice will come called a CP-504 Which is sent by certified mail if you don't contest this bill in tax court within 30 days The amount becomes final and due and payable in full So if you're not home or not at your last address or no one's picking up your mail You will have a tax due whether you know it or not so then after that 30 days the IRS can now certify the debt and file a tax lien and Revoke your passport. No matter you never received any of the letters Their only obligation is to mail the notices to your last known address using traditional US mail if you've moved or your letters

[22:14] Never reached you because you are abroad That's your problem. The IRS will not search for you or call you at this stage in the process So again from time to time people living abroad who assume they don't need to file returns if their income is under that foreign earned income exclusion amount That's one hundred thousand eight hundred dollars for 2015 Many of these Americans abroad often think they are not required to file They feel no sense of urgency because once the forms are in no taxes will be due So why spend the money on tax preparation? So no matter how many times in the past you filed and paid no taxes The IRS will not give you credit for that foreign earned income exemption if you fail to file in the future and they prepare One of those SFRs that so-called substitute for an unfiled tax return

[23:03] Now here are some other examples of erroneous tax debts that are frequently Certified by the IRS and thus become an unpaid tax debt to you Let's say you're living in the US and recently moved you forgot to inform the IRS of the move Someone files a report of income a 1099 W 2 or K 1 in your name at the old address If you've already filed your tax returns The IRS will send you a notice of proposed changes if you fail to respond to this letter The change will be made and the tax debt created again It doesn't matter if you participate in the process or had knowledge of what was going on or not And finally, here's a case that will most certainly affect some expats and they'll never know about it until it's too late Like when you get your passport revoked first note this there were almost two million

[23:51] Suspected tax identity thefts in 2013 this compares to about a half million tax identity thefts in 2010 according to the Treasury Tax Inspector General meaning tax identity theft is Dramatically on the rise so then what's tax identity theft well this applies to someone whose identity has been stolen Almost always by guess who illegal Latin American aliens and here's how it works Illegal aliens come to the US and go to a local fake document Expediter they use someone else's real Social Security number to get that illegal alien a job and some Supporting secondary paperwork so then the worker gets paid under your Social Security with zero withholding and a W 2 is issued tied

[24:40] To your account and the IRS comes after you for the taxes out now if you're living in a foreign country You're never gonna know that Typically illegal aliens who steal these Social Security numbers claim about 20 dependents So there's no withholding no money paid to the IRS for taxes due against the wages earned It'll take years for the IRS to come after you so with interest and penalties added to the balance You'll see the $50,000 limit is a very low threshold So a tax debt that involves identity theft is created and certified without taxpayers having any idea What's happening and it's estimated that in 2015 that's happened over 2 million times so idea straighten it out Well, it takes months and months of hard work to unwind work that can only begin after you find out

[25:29] There's a problem now It's possible that the first you might hear about this debt is when you're forced to return to the US Because your passport has been revoked and thus your reputation destroyed, too And remember if this happens and you don't have a second passport or at least Residency in a foreign country there is no right to an appeal to speak with an attorney plead your case to a judge in your country Nor is there any way to stop the airport from sending you back to face the IRS in court However, if you have another valid travel document, you are not gonna be in legal limbo You will have rights and recourse and typically the IRS will revoke your passport while you are in transit they know when you're flying from one country to another because computers at airports are all interconnected and they will revoke your passport while you are in the

[26:18] Air and you'll be held in the transit area under guard until being put on a next flight to the US They did that to Edward Snowden and Putin came to his rescue But you will be headed back to the US to face the IRS So if you do not have another valid travel document your only choice is to return to your home country because you will now be An illegal alien at whatever airport you're in when this happens. However, if you have another passport, it's a completely different story Suppose you're in a country that's not the US and you go to the airport and try to fly out and you find your passport's been Blocked and what if the country you're in at the time attempts to side with the US and denies you entry If you got a second passport You can pick a flight departing to any country that allows visa free travel on your second passport

[27:07] And what most people don't know is that many many Latin American Passports allow visa free travel to most Latin countries and many first world countries, too So even for example, if you have a Honduran, Nicaraguan, Salvadorian, Guatemalan, Peruvian or Paraguayan passport You're not gonna be stuck living in or flying to third world backwaters Generally, most Latin passports offer visa free travel to a hundred or so countries South of the border You've been listening to the expat files living in Latin America coming to you twice a week from somewhere south of the border Email me the expat files at gmail.com And if you want me to help you sort out your own Latin American plans and schedule a one-on-one Consult with me just send an email and let me know at the expat files at gmail.com. Nos vemos