FATCA Pushes “Accidental” Americans to Give Up US Citizenship
time.com
time.com
Some parents with European citizenship sometimes do not file an American birth certificate when registering their child for a European birth certificate. I.e. if the country facilitates registration of child based on parent citizenship and not birth location of child, they just never declare the child was born in the US. "It was a home birth"
At international schools in some countries this is an open secret and happens quite often, as long as the parents are not feds and are not under heavy scrutiny. So the kid has two different BC & passports with two different birthplaces. Some even have different birth-dates and names.
Sure saves the poor kids the nightmare of not being able to open a bank account abroad, as a US citizen.
The moral is, plan your money, plan your kids, the federales will never inform on what is in your best interest. Both kids and money come with paperwork attached. Best read up now. And yes, a timely consultation with a lawyer before the fact is most often cheaper than the cost of renouncing US citizenship and the time you waste on declaring while not living in the US.
You save them nothing, soon or later Uncle Sam will crunch numbers and discover that the German version of John Doe is an American, as far as IRS is concerned.
USA can solve the problems for 99.99% of expats and accidental Americans by making laws for those with $million+ salaries /assets. They gain nothing by making every poor guy spend thousands a year to tell IRS that they owe nothing.
FYI: People from a lot of countries are paying and will pay tens of thousands to bring their kids to USA...illegally. So US citizenship is still valuable. Very valuable.
Owning a company meant actually submitting forms to the Inland Revenue (the UK equivalent of the IRS) every year, and it was sufficiently a hassle that we paid an accountant to do it.
Fast forward to a few years after the move to the US, and the IR are still sending me forms every year to fill out about my income in the UK. Eventually I tire of this yearly ritual, so I just drew a diagonal line over every single page of the return, put a big fat '0' in the last entry, and in the comments at the end I wrote
"I live in the US. I have lived in the US for the past 5 years. I do not have any immediate plans to return to the UK, so this is a waste of your time and mine. Please. Stop."
I wasn't actually expecting it to stop... But a month or few later I got a letter from them saying that they took note of my comments, would stop sending me yearly forms, warning me that if I returned to live in the UK, they would expect me to notify them "perhaps more politely". At which point I sort of felt guilty letting the frustration spill out onto the form...
[] Before we were bought, we travelled yearly to the US (in part to see Apple). Most times, in the Bay Area, we stayed in Sausalito just over the bay from San Francisco, and caught a ferry to SF in the morning. String in the sunlight on a ferry with a Danish pastry is an excellent way to commute, and we typically stayed in 'Hotel Sausalito' (interesting fact: a converted brothel).
Early on in this series of yearly events we arrive (for Java-one this time), and John (not his real name) walks into the reception and proclaims "I am John <name> and this is my partner <my name>". They booked us into a single room with a queen bed. Both being owners we generally shared a room on these trips (small company finances can be brutal), but never actually a bed. The hotel didn't have any two-bed rooms left, and there'd been a mix-up with the booking, but eventually they gave us another room for 1/2 the price, which was an acceptable compromise :)
TSA Officer: "Hi foreigner, you don't have ESTA?"
Kid: Oh sorry this is the wrong birthplace passport. Take at look at this one plz
Even in the thirdest of third worlds, people have some sort of shop which is their families livlihood, which could be taken away and destroyed, and which would be devastating.
This insensitivity sure is first world though.
1. Getting a visa to be in the US is so difficult for citizens of third world countries that very few would find themselves in such a situation.
2. Only first world citizens would perceive an additional US citizenship as a mere nuisance, best to be avoided. For the vast majority of third world citizens, the benefits of an additional citizenship from the US far outweighs the difficulties of abiding by its rules.
And, everyone else should just shut up and not cpmplain that something they didn't ask for is being done to them, regardless of it's cost or damage? Because you think it's valuable? Wow. I can only assume you didn't read the article you are commenting on, or are the last person whos opinion anyone should care about, given how thoroughly you just disregarded anyone else's. And at the same time having the balls to charge "first world problem"... holy cow.
The visa point was about the parents of the accidental citizens. How many Papua New Guinean are there out there who were born in the US while their parents were on vacation there? How many Australians?
If you support such legislation, consider supporting lobbying groups such as American Citizens Abroad https://www.americansabroad.org/
So let's get this straight. On one side you have Americans who think it's reasonable to tax people who don't live in the country and thus don't use any of the services that tax pays for and then on the other side you have Americans who believe that all tax is theft under the threat of violence?
Talk about extremists at both ends.
(As I recall, in the UK that cost is paid via part of your passport fees. Not via world-wide taxation and monetary oversight.)
That should be "most of its citizens abroad." As we know from Anwar al-Awlaki, the US may decide to remove due-process rights of its citizens and use its military power to kill them.
But I would like to hold some investments and that's an area I have no US tax knowledge of. So that'd be another accountant hit. Maybe renouncing is the better investment, once it becomes available again.
I’m an expat and I’m not allowed to vote and I don’t owe my home country any taxes (Canadian in the US)
That’s the way it should be. I shouldn't tell my home country how to live a life I have no stake in, and they should not charge me taxes for services they cannot render abroad.
End taxation and voting abroad!
Perhaps I'm wrong but there must be countless reasons and situations like that which make this simple idea in fact merely simplistic.
I certainly expect to still receive all manner of services while abroad. I expect my property to still be mine and protected by the police. My home should not revert to being owned by the state just because I went on vacation. I damned well do expect to be able to vote in whatever country I hold citizenship rather than mere residence.
If I move to some other country fully, and want to participate in it's policy direction, then I expect to do whatever is required to gain the new citizenship and reliquish the old.
Maybe double dipping shouldn't be allowed, but being remote should mean essentially nothing by itself.
Even fairly extended residence where you have a local job and rent a home etc shouldn't constitute some sort of automatic change of citizenship. That should only happen if and when you actively choose to do it. People get sent places for work. People go places for school or research. People have to take care of family. People are in the military. There are all kinds of situations requiring a person to be somewhere other than home, for any amount of time, even years, without changing what is "home" and what is "away".
Non-US citizens can and do own property in the US. Property tax is separate from the US tax on citizenship talked about here.
> I certainly expect to still receive all manner of services while abroad. I expect my property to still be mine and protected by the police. My home should not revert to being owned by the state just because I went on vacation.
There are huge numbers of foreign owners of US real estate that enjoy these benefits by paying property taxes and income tax on any income that may be derived from such property. This is also the standard way foreigners and expats are taxed in every other country on earth save for Eritrea and the United States. So there is only an exception made for only one class of people in the United States, and that class is the group of citizens who move abroad and pay taxes abroad. They are punished for leaving, and I use this word very specifically - the law came into effect during the revolutionary war to punish US citizens that became turncoats for the British. It is a punishment that hasn’t been repealed. Oh, and if you do some Google searches you will find examples of the US criticizing Eritrea for citizenship based taxation, calling it an unfair punishment of its expats.
> If I move to some other country fully, and want to participate in it's policy direction, then I expect to do whatever is required to gain the new citizenship and reliquish the old.
Many, many, many US expats are trying to go this route, but the US has jacked up the renunciation fees in recent years, limited the maximum annual number of renunciants, and made it extremely difficult to “pass” the exit test which involves a ton of subjectivity on behalf of angry embassy employees.
> Maybe double dipping shouldn't be allowed, but being remote should mean essentially nothing by itself.
Except it means essentially everything for citizens of nearly every other country on the planet. Born in the UK and want to move to Papua New Guinea? No problem. Pay the UK only on income still derived from the UK and pay PNG based on any income derived there. Simple.
Also, don’t get me started on all those accidental Americans born prematurely while their parents were on vacation, or born to one American parent, or who lived in the US for their first year of life and have never been back. Citizenship and US taxation haunts them for the rest of their life unless they are one of the lucky few to be “allowed” to renounce.
> Even fairly extended residence where you have a local job and rent a home etc shouldn't constitute some sort of automatic change of citizenship. That should only happen if and when you actively choose to do it. People get sent places for work. People go places for school or research. People have to take care of family. People are in the military. There are all kinds of situations requiring a person to be somewhere other than home, for any amount of time, even years, without changing what is "home" and what is "away".
Residency has a pretty bright line legal definition that varies by country. In Canada, if you spend 183 days there you are a resident for tax purposes and need to pay Canadian income tax on your worldwide income. The US is the same. In some countries it is based on your “economic locus” so they take a bit more holistic approach to see whether your behaviour indicated you were a resident (resided in a home, had a job, etc etc).
What you refer to about “automatic change of citizenship” almost never happens (though, funnily enough, the US tried that shit too, stripping Vietnam draft dodgers of their citizenship until the US Supreme Court ruled it unconstitutional). We are talking here about tax residency - not citizenship. For example, in every other country you can retain your citizenship while automatically losing your tax residency obligations simply by becoming a tax resident of another country.
In the above, I’ve played fast and loose with some things to simplify and not bore people to tears, but everything is approximately correct.
The number of American citizens living overseas is somewhere between 6 and 9 million last I read. That is around 2% of the total population of Americans, and more than the populations of 15 states. If you are a regular employee, and do not own property, and do not own a business, you can mostly get by with some extra tax paperwork each year and filing FATCA. (Which you had better hope someone tells you about, because the penalties are extreme if you mess it up.) If you can get a local bank account, you can live a relatively normal life, and this is what I see being pointed to by people in this discussion as the usual case. It is not. Nearly everyone falls outside this case eventually, the penalties are harsh, compliance is difficult, and it is all unnecessary.
Some examples:
You get married, and you fail to disclose your new spouses retirement account in your FATCA filing. That could cost you five figures.
You make a bit of self employment income on the side, not realizing that self employment income is not covered under the foreign earned income exclusion, and now you owe all of your profit in taxes.
You start a small business, and really, you're just fucked. All profit earned by your foreign business each year is counted as personal income added to your AGI in the US, but not excludable under the foreign earned income exclusion. And if you don't file (a form which, by the way, says at the top that it takes an estimated 100 hours to complete), or file incorrectly, the penalty is 10k a day until the filing is corrected. But at least you are only fucked now - if you already owned a foreign business in 2018, you got super fucked with a 10 year retroactive tax on all your business profits for the past decade. If you think this is an edge case, read some expat news sites. This wiped out thousands of Americans life savings.
I am an expat. I know many expats. The usual case is to find yourself fucked by these rules. Best case is that you spend a lot of time staying informed, hire good accountants, and avoid penalties. But even then things like GILTI can come along and destroy everything you have built.
Also, there was a report that the revenue generated by FATCA was outweighed 100:1 by the worldwide banking industry’s compliance costs.
So how does it get changed? Why does everyone act like it is a forgone conclusion that it will never change?
The law was meant to tackle wealthy American residents hiding money offshore, not normal people living offshore for whom banking services are “local” to them.
If US banks had the same reporting requirements to EU countries regarding EU dual citizens accounts, this absurd situations of being denied banking relationships in the country you work and reside would stop promptly.
US banks wouldn’t. The reason that the EU is wary of ending up on the USA’s bad side, is that European banks rely on large New York banks for clearing international transfers. They can’t not do business with the USA. American banks don’t have the same dependency on the EU.
Many countries would need information flow about their former or current tax residents to enforce tax obligations, similar to the information the EU banks report to the IRS about US persons. E.g. several EU countries have an exit tax on worldwide income and they would need the reporting from US banks to enforce it.
At the point this is also a competitivity issue for the EU to attract talent and capital. Coming to the EU after having been a US person (citizen or green card) is such a hassle for banking and to manage stock investments in the $100,000s. Just so much pain in terms of paperwork and tax uncertainty that staying in the US and not coming back to the EU solves a lot of hassle.
Source: https://www.wien.gv.at/amtshelfer/dokumente/urkunden/staatsb...
The only one I can think of, is to aquire a different citizenship that doesn't allow dual citizens (like China). Although even then, the guidance on the British government site suggests they will go along with whatever crap China wants (like destroying a British passport) but allow keeping British citizenship, issuing a new passport afterwards, if requested to.
And then, well, someone times people renounce because they don't live there and they don't agree with the policies of that country.
Because the British State conferred British Citizenship onto this person upon merely being born in Northern Ireland, despite this person identifying solely as Irish, they were unable to avail of this scheme.
The UK Home Office told this person to renounce their citizenship if they wished to available of this scheme. (This was all basically nullified by the EU Settlement Scheme coming up to Brexit, but it'll probably rear it's head again)
TL;DR Dual National wanted to avail of an EU Scheme, which was unable to be used by a British Citizen. One solution was to renounce British Citizenship.
https://www.irishtimes.com/news/ireland/irish-news/explainer...
You may think politicians don't give a shit about voters, but they give even less of a shit about non-voters. Just look at the treatment of illegal immigrants or Iraqi civilians.
Anyone giving up their citizenship will be unable to vote at the next election - making them a non-voter. As such, in the eyes of senators they're no more important than the people that Academi mercenaries kill with impunity. Charging them $2000 is nothing.
Of course. Still, doesn’t renunciation of US citizenship actually require an act of Congress annually, under which all recent applicants are included? That the price was jacked up to $2000 is outright exploitation of desperate people, but certainly there would be some administrative fee (like the earlier one, which was generally considered reasonable) to cover the chain of people from your local US consulate to those congressional staff.
No. At least, none that I've heard of, and https://en.wikipedia.org/wiki/Relinquishment_of_United_State... makes no mention of it.
There is a quarterly publication of those who have renounced citzenship - https://en.wikipedia.org/wiki/Quarterly_Publication_of_Indiv... . But that appears to have been put into place mostly to try to shame rich people who expatriated, under an invalid idea that most renunciations were from rich people trying to avoid paying US taxes.
That's strangely absurd! Also wouldn't it be a bill of attainder (thus against the Constitution)?
Similar procedure is used to confirm people to federally appointed positions or allow individuals expidited paths to US citizenship.
Bills of attainer seems to refer solely to acts that render a person guilty and punish them outside of normal jurisprudence.
Of course, that would probably result in the end of it being acquired by birth ...
Children born in the US to diplomats, and possibly foreign military on posting, do NOT receive US citizenship on birth.
There are a number of provisions in the Immigration and Nationality Act where US citizenship can be lost. Elective office and becoming an officer in a foreign military (think reserves) can lose US citizenship.
A careful reading of current and repealed provisions of the INA will show ways to automatically lose US citizenship.
That's not even the real problem, though. The problem is that banks don't want to deal with the FATCA compliance issues and just refuse to deal with Americans, period. I've experienced this firsthand as an American expat and it is a colossal pain in the ass.
[1] https://www.irs.gov/individuals/international-taxpayers/fore...
There is no official guidance to FATCA and its processes, and every country has passed its own FATCA related regulations. Therefore running a FATCA compliant entity in say france requires you to comply with all french laws around fatca. Which also leads to issues with GDPR. This creates a cost of several hundred thousand USD per year just to deal with US clients for most western finance companies, per country they do business in.
Or - simply flatly refuse to offer services to any US citizens and rest easy knowing the IRS isn't going to ruin your life just because a US citizen tried to open an account without even depositing a single cent, but you didn't file your IRS stuff correctly
For example, if you earn 200k in a foreign country and that country charges you 75k on 190k of that, and decides that 10k doesn't count for some reason. Suppose the US rates are such that you owe 60k on 190k, then the FTC erases that 60k. But you might still owe 3k on the remaining 10k that the foreign country ignored.
So, if you happen to be an expat in a higher tax country (which is certainly Europe), then you won't owe taxes in the US. You still have to file, which can cost $500 for an accountant to make sure everything is correct, but owing taxes isn't really an issue.
Strange how some people want to get rid of it and how others want it no matter what.
Things are highly inconvenient, but not this hopeless. In most EU countries there is at least one bank that will open an account for (locally resident) US citizens, although the process does involve some extra forms where you have to write down your American Social Security Number as your “tax information number”.
My brother is in Denmark (previously France) and has mentioned it was a PITA but solvable.
“Renouncing your U.S. citizenship will not automatically cancel your tax obligations. Prior obligations remain, so you would only be a non-resident on an ongoing basis. You must notify the IRS of the change in your status by filing Form 8854 and then filing a copy with the Department of Treasury as well.
You will be treated as a U.S. citizen for tax purposes until you file this form. The same rules apply to green card holders. You must file the form as soon as possible after you renounce your citizenship.“
To make matters worse, there’s an exit tax (https://americansoverseas.org/en/knowledge-centre/us-taxes-a...). That applies only if you have over $2 million of net worth or “if you have not complied with your US tax obligations for the last five years.”
You pay it over all your assets, including houses and future pensions, and it’s up to 23.8%.
https://www.irs.gov/pub/irs-drop/rp-14-38.pdf, from the IRS.
Then lets say you're a company in... Germany
https://www.internationaltaxreview.com/article/b1f7nd0q58rfh...
It's such a nightmare. And if you don't get it right the US government will come after you - and the have the international treaty agreements in place where most national governments will shaft you on behalf of the IRS, because of another relevant aspect of US culture:
https://nationalinterest.org/sites/default/files/main_images...
If I end up going back to the country I was born in and leave the US what benefit do I have as a US citizen? This has been a scary scenario for a long time for me and I don't think I would be able to pay tax to the US with my income in that country.
If I basically stop being a citizen of the US by moving to another country why do I need to continue paying for it?
Is there any other country that does this?
Edit: This post made me finally read about this scenario. FEIE [1] exclusion for about $105,000 as of 2020. Is a relief because I can never earn that amount with the exchange rate in my country of birth.
1. https://www.irs.gov/individuals/international-taxpayers/fore...
The US has bilateral tax agreements with certain countries to avoid double taxation. So if you happen to be in one of these countries, you will normally pay taxes to your host country and if those are greater than the taxes owed to the US (which in many cases they will be), your US tax will be zero. You still have to file the US tax return and you still need to pay taxes on income derived in the US (such as dividends and interest) as that can not be eliminated by foreign taxes.
I have had many occasions to feel glad that I did. From military base tours to easier to entry/exit to Canada to buying a house or getting a loan. It generally makes paperwork much easier in this country and opens up a few doors.
If you think the tax filing requirement is a big deal, consider the restrictions and obligations that other countries have. Compulsory military service, restrictions on moving money, etc.
Kind of off point but I actually do have a compulsory military service in my country of birth as well.
You have a benefit of a right to return to the country of your citizenship and to live there. You also still could vote in a country of your citizenship even if living outside (not sure how that fit in US federal setup).
You don't "stop" being a citizen. Part of the process to apply for citizenship is education about what becoming a citizen means through the civics test, and it should be very clear to you that this is not meant to be just a convenient thing that you do as a formality.
Citizenship comes with rights but also duties, if you are not willing to accept the duties that comes with it, you should not become a citizen and you should instead renew your green card.
> If I basically stop being a citizen of the US by moving to another country
And I was saying you don't stop being a citizen by moving somewhere else.
Citizenship is not something you can (or should be able to) just turn on and off at your convenience.
For example the Roth IRA, will in most cases due to reciprocal tax treaties, allow for a tax free pension even when your tax residency is in another county.
On top of the trust structures I've alluded to, there are few reciprocal data sharing arrangements with countries forced to comply with FATCA. In other words, the data sharing usually only goes one way.
Yes, this is a remarkable pain to learn and administer, but it's all possible to do without paying thousands in ongoing accountant and lawyer fees.
This means that it's possible to shelter your assets in a remarkably secretive way the US. So in one sense, you could consider US taxes as insurance against spurious lawsuits in say the EU, or bad faith spouses wherever you get married.
> Usually, it is best for United States citizens to not hold TFSAs since the costs of tax reporting and compliance usually exceed any benefits.
There is no US equivalent for TFSA.
[1] https://www.taxesforexpats.com/articles/retirement/simple-us...
Where does someone begin this process? A few starting points would be appreciated.
But based on FATCA, only the other countries have a responsibility of reporting wealth information about US citizens, while if you are a Russian or a Brit or whatever you can safely stash all your wealth in the US if the tax regime is more lenient than your own country.
However, you could rollover funds from a Roth 401(k) to a Roth IRA, just be aware of the clock for the 5-year rule.
If doing any of this stuff please for the love of binary get proper financial advice!
I have already made up my mind to renounce, due to the immense stress and uncertainty. But you can’t even do that because all embassies are closed until further notice. Top that with the hefty fees to file the exit taxes and the renunciation fee and it’s a giant shit sandwich.
I advise never living abroad if you are an American. And think very carefully before getting permanent residence or US citizenship as a foreigner. You are becoming an inmate of the IRS for life.
If you don't have any desire to return to the US why not just ignore it?
I net in the low 6 figures, via my own consultancy. I have a one man shop which basically incurs the wrath of the IRS because it doesn't fit into the IRS tax code worldview. This is not abnormal, in fact many experienced software people in the city work this way.
I also can't just ignore it. The IRS under the Obama administration launched one of the most aggressive foreign tax ramp ups ever. With FBAR/FACTA, they know everything you have. It is incredibly risky to ignore filing and paying your US tax obligation - they can do all kinds of horrible things, with minimum 10k penalties and foreign agreements in place for enforcement. Plus I have retirement accounts in the US which could be affected.
I could see improving things but your perspective still sounds like whinging. Accounting and filing is the cost of doing business. More troublesome is the SS and other tax contributions you're responsible for, but that just means you should charge more.
To give you a comparison, this sounds to me like people stating we should wipe out student debt. Doing so is inherently regressive. Already well off people go to college anyway and people with a degree make more over their lifetime. They are not the people who need help the most. Likewise, if you are encountering serious financial strain because of this you need to charge more, but you're still making more than most people do.
Neither does investing in a business. You just have to pay taxes on income derived from that business, as normal.
FATCA can be completely nullified by not maintaining foreign bank accounts. Keep your money in the US, problem solved. Maybe that's not an option for everyone but it's still an option.
Buying property exposes you to capital gains tax, which is essentially double taxation, because the UK taxes the buyer unlike the US.
GILTI tax is limited to company ownership. Which is what hit me. I realize that won't affect a lot of people, but for those in the IT field it is very common in London to have a one man or small group consultancy. Because of this, I was essentially retroactively taxed on all company revenues despite not having access to that money (since it's in the company, obviously). Truly insane. Then to pay the retroactive tax, you have to withdraw money from your company which obviously incurs local taxes. Massive double taxation.
This is all the tip of the iceberg. There are many ways to get screwed as an American abroad.
I know money isn't everything, but would be curious to know what is keeping you in London (as someone in an analogous situation asking myself the same question).
That is not even remotely feasible. You pay forex fees every time you buy milk? Lots of government stuff / utility companies will only accept local bank accounts. The hassle and expense of having only a foreign bank account in a foreign currency is massive.
That said, I have recently heard of a new product called the Transferwise Borderless Account that lets you hold money in different currencies, and along with the provisioning of local banking IDs in several jurisdictions like the EU, UK, Au/NZ, Hungary, Romania, Singapore and the U.S. It also comes with a debit Mastercard.
Any thoughts about this?
You couldn't get paid straight into it, so you need to get paid into your home account, then transfer in dollars, then convert them into local currency, so you're still doing two forex transactions. Better than one for each purchase, but will not ideal. Also, it's still not a real local bank account, so all the problems wrt government and bills still apply.
I'm thinking this could be quite useful for digital nomads.
"MYR is considered to be a restricted currency, which implies an inherent limitation to the tradability of this currency. Fund transfers in this currency are not allowed outside of Malaysia"
Lets say you work in Malaysia; your salary is paid in MYR as its legally required to be. You can't get a bank account with most banks because US passport - therefore you can't get a MYR bank account.
The price of renouncing your US citizenship went from around $500 to just under $3000, so the key issue seems to be to make renouncing more accessible.
If filing IRS paperwork no matter where you reside seems an onerous obligation for a citizen, try compulsory military service or currency export controls, both of which the US does not have.
As others have mentioned, it isn't just a case of filing IRS paperwork. I know many non-US banks will refuse to do business with someone if they discover the person is a US citizen because the bank paperwork is not worth it.
Recently, one of the banks in EU falsely flagged me as a potential US citizen. I had to file tons of forms to opt out.
I couldn't figure out why, there was no reason for that since I've got no ties with US and I've visited as tourist only couple of times. Then I realized my phone number I used in communication with the bank is Canadian (live in Canada, but EU citizen). Please note that the country code for Canada and US is the same (+1). What a joke.
The problem is the EU banks are forced to be compliant with this thing, but they have no clue who is US citizen and who is not. So they can just guess.
but on accident.
[0]https://en.wikipedia.org/wiki/Birthright_citizenship_in_the_...
contact@americains-accidentels.fr
Not so few people who did just some temp gigs, or worked in US on L visas.
Linked article says a bit more than 3,000 around the world. So, 0.001%. Article content is clickbait. Basically, a very small part of the population complains about something that others work decades on.
That’s like saying “Accidental lottery winners complain they have to pay taxes, but hey, we need to make sure the tax code is good for everyone” - totally, but don’t paint the article like it’s some massive global problem of lottery winners struggling.
At the end of the spectrum are these accidental Americans.
In the middle you can find e everything, e.g. your kid studying in the EU that cannot open a bank account there or issues getting a real estate loan to buy a house in the foreign country you work and live in. Essentially opening a bank account abroad is a no-go unless you lie or have a lot of money.
Then you have ultra wealthy tax evaders that were the target of those regulations. Obviously these people don't have a hard time opening bank relationships anywhere.
Sorry, but there is no way in hell a European wouldn't know they have dual citizenship by being born in the U.S. And there's no way they wouldn't have renounced it in all this time unless they saw that citizenship as a benefit that outweighs the costs, or at least as a potential benefit down the road.
This article imbues Accidental Americans with the stereotypical dumbassery of I-Am-A-Real-American's in an attempt to get me to sympathize with people who don't want to pay taxes.
Edit: added Hulk Hogan entry song reference for clarity
Also, renouncing this accidental citizenship is far from trivial. That requires jumping through a lot of bureaucratic hoops. They never received any benefit from it, and if they knew at all, they ignored it.
And they have no problem paying taxes, they just pay their taxes in the country in which they live and work. They don't want to have to fill in tax forms for every random country that chooses to bestow unwanted citizenship on them.
Make no mistake, the only reason this is an issue at all, is because the US is too powerful to ignore. No other country does this (except maybe Ethiopia or Eritrea, I think), and no other country would get away with this. Only the US does.
It's rather odd that for a country where so many people question Obama's citizenship, the country is so eager to claim ownership over people who don't want it.
So, if anything, their parents are to blame and not these folks who had no choice in the matter.
It's quite unreasonable to expect all non-Americans to be aware of all these little exceptions in US law.
Source: My own children, both dual citizenship, different names on each passport due different naming legislation for unmarried parents, one with two passports, the other currently only with one.
It is also possible they knew and they didn’t think it was a problem. The US is one of only two countries in the world that do taxes based on citizenship.
I can definitely see a lot of people would just ignore that problem thinking it’s US overreach and they are a citizen of a sovereign country, then low and behold one day it catches up with them at their bank.
One could claim "I have never been there since I was an infant" but it falls on the people rendering the service to verify the facts.
I can see why people are upset (and I don't like the warmongering nation) but many of these complaints are not really well considered in my view.
The US charges far more to give up citizenship than most other countries, and requires you to pay any outstanding tax before you can do so. For some people that is just not possible. What exactly are they supposed to do now that they can't access any financial services?
Wrong on both counts. I know two people who fall under the category you deem "no way in hell"
I’ve known people who didn’t realize they were actually undocumented immigrants having grown up here past where their memories began. It is an awkward conversation with their parents eventually, but not knowing your citizenship isn’t weird.
The woman was brought over as a baby, but chose to keep the citizenship into adulthood, presumably acquiring a passport or other citizenship documents. Otherwise how are the banks finding out ?
Why should she be surprised if the IRS eventually comes for her ?
Seems like giving up citizenship is the right solution for these people.
Not debating the merits of whether the US should be taxing expats, this does not seem "accidental" to me in the least.
Also as far as owing onerous back taxes go, aren't taxes you paid in your country of residence deductible ? For most EU countries wouldn't that result in net zero US taxes ?
Edit: as pointed out by commenters, you have to list your place of birth in documents. stupid me
That is ... not how citizenship works. Once you are a citizen, it can be very difficult to get rid of that status (souce: born in the US, will end up paying an arm and a leg to get rid of mine). Failing to get a passport, file returns with the IRS, etc. can lead to you getting ignored, but it can also lead you to getting into serious hot water in the future.
Example: most passports list the place of birth of the holder. If you are an American citizen, you must enter the US on a US passport. Because of American citizenship law, someone trying to enter the US on a Dutch passport with a place of birth listed as being in the US is going to have to do some explaining, and possibly provide documentation of renouncing their US citizenship. "I never applied for my American passport" is probably not going to cut it. It's a huge pain!
> Also as far as owing onerous back taxes go, aren't taxes you paid in your country of residence deductible ? For most EU countries wouldn't that result in net zero US taxes ?
It depends! But you still have to file, and there are still penalties for filing late, and even if you do, IRS reporting requirements to other banks mean that many European financial institutions won't touch you with a 10-foot pole no matter if you are also a European citizen.
Ones that will (like my bank), still won't offer you much beyond current account services and a basic savings account. If you want to do any kind of real saving for the future or basic investing (ETFs, for example), you are going to have trouble. The supposed disruptors in the market for this kind of thing (Trade Republic etc.) certainly don't have the resources or the interest in dealing with you either.
Closest solution I’ve found is a Schwab International Account based in the US, and buying Berkshire Hathaway shares, because it's so broadly invested in lots of other companies.
ooh, good point. I'd forgotten about that completely.
"If you are an American citizen, you must enter the US on a US passport" is true for air travel. If you travel by land or sea, it is possible to enter with other documents (driver's licence, birth certificate... see https://help.cbp.gov/s/article/Article-3618?language=en_US).
This is especially important in times of pandemic when the US government elects to stop processing passports and dual citizens may hold a passport of another country to be able to travel out, only to have re-entry problematic upon return...
It's not surprising that banks would cotton on. The US has been very aggressive about enforcing reporting requirements on citizens abroad, and they do it via the banks.
No, the USA has treaties with only some other countries that result in net-zero taxation of self-employed people. If you live in a country with which a tax treaty has not been concluded, and you are self-employed, you are liable to both your local country for income taxes etc., and to the USA for Social Security and Medicare.
(Just guessing, I don't have experience with this)
Social Security and Medicare is paid by American workers regardless of their total income. That is, there is no poverty limit under which they do not have to send that money to the IRS.
I don't believe it's possible to renounce US citizenship until adulthood, in which case there is no choice.