The Guardian: EU fights American tax on accidental American

3 min
Published on: 16-12-2019 Last modified on: 18-03-2024

According to The Guardian, the EU pushes the US to dilute rules on dual-nationality citizens unknowingly liable for American tax.

The EU has joined the fight against an American tax law that has put tens of thousands of European citizens at risk of having their bank accounts frozen.

Accidental Americans not aware of American tax

In a letter to the US Treasury Secretary, the Council of the EU – the bloc’s main decision-making body – called on the US to clarify rules affecting so-called “accidental Americans”, who left the US when they were just months or years old and may have never been aware they owed American tax.

EU: cut the cost of renouncing American citizenship

The EU has also urged the US to cut the $2,350 bill for renouncing American citizenship and to simplify US income tax filing requirements.

The council’s intervention could help an estimated 300,000 to 500,000 accidental Americans across the EU. Around 40,000 citizens in France are affected, and the UK is believed to host at least as many.

Deadline 1 January 2020

The US is the only country aside from Eritrea that taxes non-resident citizens on their global income. It ramped up its efforts in 2010 with the introduction of the Foreign Account Tax Compliance Act (Fatca), which requires foreign financial firms with US operations to report information about American taxpayers by 1 January 2020 or face huge fines.

Banks have been racing to identify any remaining dual-nationality customers before the deadline and may freeze accounts of customers who do not supply tax ID details, which many “accidentals Americans” never obtained.

The US Internal Revenue Service (IRS), the country’s taxation authority, recently issued an update, saying it would consider each case and would not automatically fine banks for failing to provide all the tax ID numbers of suspected dual nationals.

But the EU’s letter said the update was not binding and left too much power in the hands of the IRS to determine whether banks had breached the rules.

“These situations seem to be the most frequent source of concern for banks and other financial institutions,” the EU letter explains.

Accidental Americans hunted down for American tax

Many people fear being hunted down for taxes they never knew they owed, and are choosing to renounce their US citizenship rather than go through the complicated process of filing American taxes to American authorities every year. But candidates still have to file six years of back taxes in order to scrap their US citizenship.

Big upfront costs for European Americans

In September the IRS announced it was giving a US income tax break to some American expats looking to renounce their citizenship. The Council of the EU said it was a “step in the right direction,” but argued accidental Americans were still confronted with big upfront costs.

“This procedure is lengthy, costly, and complex. The renunciation fee alone amounts to $2,350, on top of which the costs of filing tax returns and any tax liabilities would be added,” the EU letter said.

“We would therefore propose to lower the cost of renunciation, to simplify the American tax filing procedure and not require it for all cases.”

Americans Overseas helps European Americans with American tax

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 American 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 American 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 tax obligations.

If you have more questions about the American tax system you can contact us at Americans Overseas.

Contact us for more information


Source: The Guardian


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