According to newspaper Le Figaro the IRS tracks down accidental Americans in Europe.
In 1964, a young European couple moved to the United States. The husband had taken a job at IBM and his wife was expecting their first child. They spent two years in New York, together with their little Renaud, who came into the world just a few months after they’d settled. Then, following a transfer, the family returned to France.
Renaud knew that being born in the United States, he had dual-citizenship. As a teenager he used to show off a little to his friends, even if he didn’t know the country. But coming of age, he assumed he’d lost his American citizenship. Then, one day in 2013, his bank, HSBC, told him they’d found a “trace of Americanization” in his file.
At first, he didn’t worry too much about it. But a few months later he discovered an astonishing transaction on an account he had with a French bank, Caisse d’Epargne. “At that time I had almost 5,000 euros of Home Depot shares that my father had given me. In September 2013, I decided to sell them and earned only about 4,100 euros. In November, I was astonished to see that the bank had canceled the entry and only re-credited 2,900 euros to my account. The difference was the $1,500 deducted at the source without my consent from the IRS- the U.S. tax authorities. I was livid.”
There are several thousands of people like Renaud, who are European but also “accidental Americans”. He never took the necessary steps to renounce his U.S. citizenship, so technically, he’s still a US citizen. But because he doesn’t want to file a tax return in a foreign country to which he has no ties, he’s also an outlaw — at least from the U.S. perspective. And as a result, he lives with the permanent threat of an IRS tax penalty.
In the United States, taxpayer status is based on nationality, not on residence. And being a U.S. taxpayer means having to declare your income to the IRS every year, regardless of where you live or work. In 2010, Washington passed the Foreign Account Tax Compliance Act (FATCA), a piece of legislation designed to fight against tax evasion that requires banks around the world to disclose information (income, account details, etc.) on any of their U.S. clients. Failure to do so may result in penalties.
That’s because every American — “accidental” or not — is subject to the same tax rules. As such, thousands of accidental Americans have received bank letters in recent years obliging them to become compliant with the IRS- the U.S. tax authorities.
Most accidental Americans have decided to bury their heads in the sand — even if it means one day having to pay back taxes or penalty fees. Others make an effort to get their paperwork in order and assess payments to IRS. Usually no taxes are owed.
As for those who want to relinquish their nationality, they must first file the past five tax years for the IRS. It can become complicated quite quickly. The tax bases differ between the US and Europe, notably on things like life insurance and the sale of principal residences.
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 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 more questions about the IRS and USA tax you can contact us at Americans Overseas.
Source: Le Figaro
Understanding the US tax system, the obligations, and all the additional terms can be difficult. Especially if one lives outside of America. Is your question not answered? Contact us.
U.S. citizens and resident aliens who live abroad are generally required to file a federal income tax return and pay taxes on their worldwide income.Read more... about Who is required to file taxes in the US?
Yes, US citizens are required to file taxes on their worldwide income, regardless of where they are living.Read more... about Do US citizens living abroad still have to file taxes in the US?
Received an American check? You can cash your check in the following ways: cash the check at your own bank, transfer to another person (endorsement), cash checks using an online service or cash the check by another bank.Read more... about How can I cash my US check?
US citizens living abroad may be required to file Form 2555 and/or Form 1116 to claim the foreign-earned income exclusion.Read more... about Are there any special tax forms required for US citizens living abroad?
FBAR (Foreign Bank Account Report) filing is the requirement for certain U.S. individuals and entities to report their foreign financial accounts to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. The FBAR filing requirement applies to U.S. persons who have a financial interest in, or signature authority over, one or more foreign financial accounts if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year.Read more... about What is FBAR filing?