June 2018 JD Supra
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I didn’t know that I was American – JD Supra 6/5/18.

There are Individuals out there that are US Citizens (“Americans”) and they are not aware of it.  Under US Tax Law, these individuals have US tax reporting responsibilities and tax obligations.  These Individuals are known as “Accidental Americans”.   

How can someone be an American and not know it?

  • The Individual could have been born outside of the US to a US parent, and been told by the parents that the Individual was not a US citizen as the Individual is a citizen of another country.  
  • The Individual could have moved to another country at a very young age.
  • The Individual became a citizen of another country and thought that their US citizenship had ended.
  • The Individual could have been born in the US and was not aware of  a Social Security number and spent their entire life elsewhere.
  • The Individual never renewed a passport.  

Accidental Americans are US citizens that have not terminated/renounced their “US Citizenship” under US law and have continuing US tax filing and reporting obligations.  

Accidental Americans are (10,000 in France) expressing their frustration when they receive “unexpected mail” from their Banks telling them that they have to fill out forms for the IRS because they were born in the US, or when they are hit with a “tax bill” like Boris Johnson (major of London that is a UK citizen but was born in NYC) when he sold a London home.  Accidental Americans are “suddenly exposed” and their names are on the IRS Radar.  FATCA enables the IRS to access international banking information from US Citizens or Green Card Holders residing abroad.  The IRS and the Foreign Financial Institutions have been sharing financial information since the implementation of FATCA.  

Many Foreign Financial Institutions are so fearful of the IRS and the penalties associated with FATCA non-compliance that they simply close the account of the Accidental American.   The Accidental Americans are then driven to a US consulate to renounce their citizenship and pay US “exit taxes” or they update their US citizenship status and potentially pay back taxes and penalties.

What should Accidental Americans do if they learn that they are US citizens?

US citizenship law is complex and Accidental Americans ought to trace back their family’s citizenship, residence, and employment.  If an Individual suspects that he or she might be a US citizen, the Individual should seek specialized tax advice in order to get their affairs in order and get into compliance.  

Accidental Americans also have the option of renouncing their US citizenship, a/k/a expatriation.  The process of expatriation is costly and complex.  Besides possibly filing five years of back tax returns and paying five years of back taxes, there could be an “exit” tax involved, as well as the requirement of going through the process of getting an appointment at a US consulate office to formally give up citizenship.  

Don’t be a victim of your own making

A person is considered a US citizen until the date the US Department of State issues a certificate of loss of nationality.   Until then, “Accidental Americans” have tax filing and reporting obligations with the US Treasury Department.  

If you suspect that you might be an “Accidental American”, and you are unware of potential tax filing obligations and responsibilities, you should investigate your obligations and understand if you need to come into compliance.  The IRS Streamlined Filing Compliance Procedures is targeted towards “Accidental Americans” that did not understand their responsibilities.  

Consult your specialized tax advisor.