What is an Accidental American?
Summary
Have you ever heard of the term 'Accidental American'? This term refers to individuals who have unintentionally acquired the status of American citizen. This often occurs with people who were born in the United States while their Dutch parents were temporarily staying there for work, vacation, or study, or with children born in the Netherlands to one American parent.
An ‘Accidental American’ is someone who, often unknowingly, is considered a U.S. person. This can happen if you were born in the U.S. or have an American parent. Many ‘Accidental Americans’ (also referred to as incidental Americans) have only lived in the U.S. for a short time, sometimes just a few days, and have little to no ties to the country.
Key Features:
– Born in the U.S. or with an American parent.
– No strong ties to the U.S. (not raised, educated, or worked in the U.S.).
– Often unaware of their American citizenship.
Why is it important to know if you are an Accidental American?
As an ‘Accidental American’, you are subject to American tax laws, meaning you must pay taxes annually on your global income, regardless of your residence. Additionally, you may need to report your financial accounts outside the U.S. Ignoring these obligations can lead to significant fines and even criminal prosecution.
The impact of FATCA on ‘Accidental Americans’
The Foreign Account Tax Compliance Act (FATCA) has significant implications for ‘Accidental Americans’. FATCA requires foreign banks to report the details of American customers.
This has led to problems for many ‘Accidental Americans’, such as difficulties in opening bank accounts or maintaining existing accounts without a U.S. Tax Identification Number (TIN/SSN).
Streamlined Procedure
A key part of the assistance for ‘Accidental Americans’ is the Streamlined Procedure, introduced by the U.S. federal tax service.
This program is specifically designed for U.S. citizens living outside the United States who were not fully aware of their U.S. tax obligations. It enables these individuals to get their tax affairs in order without being exposed to the severe penalties that normally apply for late filings or non-compliance.
The Streamlined Procedure offers various benefits, including:
- Reduction or waiver of penalties for late filings and non-compliance fines.
- A simplified process to file overdue tax returns.
- The opportunity to submit a ‘good faith statement’ explaining why U.S. tax obligations were not previously met.
To qualify for the Streamlined Procedure, ‘Accidental Americans’ must meet certain criteria, such as proof of residency outside the U.S. and not deliberately ignoring their U.S. tax obligations. This procedure is a valuable resource for those dealing with the complex situation of dual tax obligations and offers a path to compliance without the fear of harsh sanctions.
Understanding and navigating the status of ‘Accidental American’ can be complex, but there are resources and procedures, such as the Streamlined Procedure, that can provide significant help and relief.
Recent Developments
Recent changes, such as IRS Notice 2023-11, provide some relief by allowing financial institutions to use temporary TIN codes. Additionally, there are options like the Streamlined Procedure to help taxpayers regularize their tax status.
The Dutch Department of Finance has also updated FAQs to inform ‘Accidental Americans’ about their rights and obligations.
It is essential for ‘Accidental Americans’ to understand their status and take the necessary steps to meet their fiscal obligations.
Assistance for Accidental Americans
We, the founders of Americans Overseas, were born in the Netherlands and obtained our American nationality through our (American) mother.
When we heard about the US tax system for the first time around 2013, we were in total disbelief (it can’t be true!), anger (how can they do this?), fear (am I going to get fined or pick up other problems?), and panic (what should I do?). It is (unfortunately) true that there is an additional American tax levy. But there’s no information from the local government, and when approached, the consulate referred us to the IRS, and the IRS was impenetrable.
That’s why we started this initiative to help people from all over the world by providing proper information about the US tax system to avoid unnecessary panic and offering help free of obligation and free of charge. If needed, we have a network of affordable professionals (accountants) who can help you with your bitcoin tax obligations.
Contact us for more information
Ministry of Finance updates FAQ on Accidental Americans
On October 4, 2023, the Ministry of Finance updated the Q&A guidance on accidental Americans (‘Accidental Americans’) in the context of FATCA reporting.
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