Avoid Fines and Stress: Tips from Durlacher for American Dutch with U.S. Tax Liabilities on Americans Overseas

There are tens of thousands of Dutch nationals who more or less happen to hold both Dutch citizenship and a U.S. Green Card or passport. They find themselves in a complex and costly bureaucratic situation because of their U.S. tax obligations.

Daan Durlacher, co-founder of Americans Overseas and expert by experience in this field, shares his insights on the challenging tax issues often accompanying unintended U.S. citizenship.

Throughout U.S. history, millions of people have made great sacrifices to acquire the coveted designation of “U.S. citizen”. However, since the U.S. government has become tougher on tax cheats, some feel that prized citizenship of “the land of the free” can be a burden rather than a privilege.

Dutch nationals also holding U.S. citizenship in dire straits

This is especially true for tens of thousands of Dutch nationals who also hold U.S. citizenship in addition to their Dutch nationality.

This is because the United States has a unique tax system that requires US citizens to always file tax returns, even if they have never lived or worked in the US, or if they have dual citizenship.

The obligation to file even applies to 100% Dutch citizens with a still valid Green Card, a type of residence permit for the US.

FATCA

This situation is the result of the Foreign Account Tax Compliance Act (FATCA), a law passed in 2010 to crack down on undeclared savers worldwide. FATCA affects not only Green Card holders but also people like Joe Average, who are U.S. citizens by birthplace or U.S. parents.

The Netherlands complies with U.S. law FATCA, which requires Dutch banks to pass on information about their customers who are considered “U.S. persons. This information is provided to the U.S. tax authorities through the Dutch tax authorities.

Daan Durlacher, an entrepreneur originally from Apeldoorn but who also has U.S. citizenship through his American parent, advises, “You have to be prepared for this moment.” He knows what he is talking about because to be compliant with the Internal Revenue Service (IRS), the U.S. tax authority, he had to file tax returns and discovered that the sale of Dutch BVs in America was suddenly taxable.

“The tax amount was initially significant. Then I called in an American accountant and ended up having to pay only a fraction of that. When that was successful, I certainly celebrated.”

Listen to the story of Daan Durlacher

Together with Michael Littaur, a fellow sufferer, Durlacher founded Americans Overseas. This organization tries to bring the issue to the attention of both the government and the “American individuals” in question.

These “American citizens” actually find themselves in violation if they eventually decide to file a tax return, unless they take advantage of an amnesty program. Those who solemnly declare that they never knew they were required to file a tax return are not fined and only have to file tax returns for the past three years, otherwise a six-year period applies. However, the duration of this arrangement is uncertain, Durlacher warns.

Tax return obligations in the U.S.

An estimated 33,000 people with both Dutch and U.S. citizenship live in the Netherlands, plus another 70,000 to 100,000 people with Green Cards. Each of them has tax return obligations in the United States.

Durlacher notes, “Because of questions from banks and the publicity surrounding this issue, Americans Overseas has already been able to help many Dutch people with dual nationality. But daily we still get calls from people in panic because they have received a letter from their bank, or worse, threaten to lose their bank account.”

He can reassure most people, especially those who are regular employees or small self-employed people without significant investments. In fact, the Netherlands and the U.S. have signed a treaty to avoid double taxation. Although the obligation to file U.S. tax returns remains, in many cases the tax bill will be zero.

U.S. taxes complex

Nevertheless, there are significant bureaucratic challenges. First, the U.S. tax return form is too complex for many to fill out on their own, especially the first time. “You really need someone familiar with U.S. tax law, a so-called CPA, a U.S. tax advisor,” Durlacher explains. “They charge between €200 and €300 an hour, and the time required can quickly add up to 10 hours of work.” Americans Overseas is currently negotiating with advisors to offer a significantly lower all-inclusive rate.

In addition, a Social Security Number (SSN) is required, just as for ordinary U.S. citizens. However, obtaining an SSN is a lengthy procedure.

It gets even more complicated when investments come into play. U.S. tax laws tax investment gains, including gains on the sale of one’s home. Durlacher also gets many reports that Dutch banks are being difficult on their customers with both Dutch and U.S. citizenship. “In the beginning, they were suspicious and sometimes wanted to deregister customers completely. Now you can still have a checking account, but they don’t want to open an investment account. This also applies to investment mortgages.”

In extreme cases, it is possible to renounce U.S. citizenship. Durlacher notes, however, “Even that is a complex procedure. You must first be able to prove that you have filed tax returns for the past six years. Besides, why renounce a nationality that many actually cherish? You have something you can make use of. If you want to study or work in the U.S., having U.S. citizenship is not a problem.”

Get informed at Americans Overseas

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