I remember the vivid scene from my days in Palm Springs. At the end of a well-attended convention, I was walking home when convention goers were departing.
I heard a mildly anguished young man as he leaned out a back seat car window: “They’re taking me home, don’t let them!” The voice faded as the car sped toward Los Angeles.
That visual was funny, but being sent back to your country of origin on account of a tax pickle is clearly not.
The U.S. has an international agreement with Mexico with a mechanism where one country can request the other to deliver up people charged with specific crimes, and other agreements to cooperate in tax investigations.
I have found instances where people were extradited for tax crimes. It can and does happen.
What is the likelihood of being charged with a federal tax crime? The vast number of IRS interactions are “civil” matters. Tax, penalty and interest are paid and that’s that. The Department of Justice website has details of most tax prosecutions where one can see recently profiled cases. But the Panama Papers are a tectonic shift, if not an outright tax earthquake.
Americans were named. President Obama asked Congress for increased tools against evasion. Will they come knocking on your door and ask you to put down your cerveza?
The tax landscape of Americans overseas is extremely complex, more so than for the typical home lander. Opportunities to mess up are abundant. Penalties are steeper, even for failing to mail an information return with no tax due. It is only a matter of time when “an example” is made out of someone. “Serial” non-filers come to mind, and those who have not knowingly reported foreign bank accounts, ownership in foreign corporations or other businesses. Considering that one of the factors in decisions to prosecute is the “social control” value, I fear that the Panama Papers may propel prosecutors, tax people and politicians into going after matters once solved with civil penalties, just to send a message. I think it is like playing the lottery, but some people buy waaaaay more tickets than others.
Mexico is typically reluctant to deliver up its own. In the case of U.S. citizens, it is much easier for a person just to be found “unwelcome” and taken to the border. Not legally an extradition, but the effect is the same. Enjoy your cerveza … that knock? It’s just your neighbor, over for a cold one.
Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the U.S. Tax Court and other taxing agencies. His love of things Mexican has led him to devote part of his practice to the tax matters of U.S. expats in Mexico. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..">This email address is being protected from spambots. You need JavaScript enabled to view it..