Born in the US? Born in US territory? You’re considered a US person. Even when you live and/or work outside of the United States of America.
You may not know this, but the information about this is not shared proactively by the US or other countries.
You have to file taxes, based purely on your American citizenship.
The US has a different tax system than most countries in the world. The tax system, CBT (citizen-based taxation), is a tax system based on citizenship, not on residentship. This puts a huge burden on people living abroad. They are faced with a double tax liability with additional costs, considerations, and administrative burdens.
Whether filing will result in owing taxes to the IRS depends on personal circumstances, and double taxation treaties made with the country in which you live and or work. Not filing taxes in the US is a criminal offense.
Here is an example of a situation that often occurs in people who live outside America for a longer period of time:
Father and mother work and live in the United States of America for a certain period of time and are fortunate enough to bring a beautiful child into the world. As it should be, the parents report this child to the consulate of their origin so that the child gets a proper travel document. After a few years, the family returns to their country of origin.
What people often don’t realize is that the child, born on American soil, is also an American citizen next to the other nationality of the parents. Often the parent or child finds out at a later age and then comes into contact with the American tax return obligation.
Note: the US Tax obligation starts at birth.
President Obama introduced the FATCA (Foreign Account Tax Compliance Act) in 2010, in order to track down Americans that were keeping bank accounts without reporting those to the tax authorities. This law forces all financial institutions (banks, insurance companies, pension funds, etcetera) across the globe to provide all information regarding American clients to the American government.
Failure to comply will result in exorbitant fines. Further agreements were made with foreign governments in order to make sure that the law was being applied. The financial institutions require an SSN/ TIN of the client to get the data transferred properly.
American people living in America, who failed to report their foreign bank accounts (FBAR), could expect high fines. $10,000 per account number or 50% of the amount in the account, whichever is greater.
Fortunately, the American government and its Tax Authorities (IRS) do make allowances for this group. Americans living abroad, who were unaware of this law, have the one-time option to file their taxes via a special amnesty program.
This prevents fines and is called Streamlined Procedure or Relief Procedure. If desired, there is a way to renounce citizenship, a highly personal irreversible choice that does not exempt one from the US tax liability unless properly completed the US tax return.
We used to have a lot of questions and we can imagine that you do too. Many of the questions we had have been posted to our knowledge center. Examples would be:
You can always call us for more information (always free of charge).
We, the founders of Americans Overseas, were born in the Netherlands and obtained our American nationality through our (American) mother. When we heard about this 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 fines 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 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 tax obligations.
If you have any questions about the US tax obligation can contact Americans Overseas.