As the United States of America is the only country that tax its citizens on worldwide income no matter where you live! Even if you were born in the US for a none of US parents and moved with your parents to their home country! That is why we call you an American by accident. Still US tax rules applied.
As a result of the above statements an American by accident will be subject to a severe penalty to all not filed us taxes and not reported foreign bank accounts
Examples of American by Accident:
- Born abroad to a US Citizen parent (father or mother)
- Born on US soil to a none US citizen who return to their home country
- A US citizen who chooses to earn a foreign citizenship with submersion that his/her US citizenship automatically dropped!! Unless Citizenship Renouncement Process.
So, now you are American by Accident impacted by FATCA!!!
The Foreign Account Tax Compliance Act (FATCA) is a great move by the US government aiming to prevent tax evasion by U.S. citizens living abroad and holding bank accounts and other financial assets outside the United States.
Under FATCA, specific U.S. taxpayers reside and working or investing abroad must file their US Tax return on worldwide income and report all their foreign bank accounts (FBAR – FinCin 114) with an aggregate daily balance excess $10,000 in one day within the year.
American by Accident Options!!
- Option one: Comply with US Tax and FBAR filing requirements
- Using Streamlined Procedure (SLP) that covers 3 years of tax returns and 6 years of FBAR
- Avoid all civil and criminal penalties
- Option two: US Citizenship Renouncement
- File the last 5 years of US tax returns
- Report all your Foreign Bank Accounts – FBAR
- Pay All the US Tax Liabilities
- Under the current law, the U.S. government treats citizenship renouncement as a taxable event.
- A citizen attempting to renounce is deemed to have sold all his property as of the day before expatriation and is taxed immediately upon any gains realized from such theoretical sale.
- As a practical matter this entails marking to market any property held by the expatriate and paying an immediate tax to the extent any gain has been created by the adjustment.
- Although the code does provide some assistance in the form of a statutory exemption of up to $651,000
Need more information to understand both options, and to make a clear choice that you will not regret in the future! Please consider taking advantage of the free consultation that Tax Actions offers!