Accidental Americans

Who Are Accidental Americans?

An accidental American is someone who holds U.S. citizenship but may not have a strong connection to the United States because they could be an American born abroad. This includes individuals who:

• Were born in the U.S. but moved abroad as a child.
• Acquired U.S. citizenship through a parent but never lived in the U.S.
• Never considered themselves American but still hold a U.S. passport.

Under U.S. law, all U.S. citizens, regardless of where they live, must file tax returns. Many accidental Americans only discover their U.S. tax obligations when applying for residency abroad or when foreign banks request proof of U.S. tax compliance due to Foreign Account Tax Compliance Act (FATCA) regulations.

Why Do Accidental Americans Owe Taxes?

The U.S. follows a citizenship-based taxation system, meaning that all U.S. citizens, whether they live in the U.S. or not; must comply with tax laws. As an accidental American, you may be required to:

✅ File a U.S. federal tax return if your income exceeds:

• $13,850 (single filers)
• $27,700 (married filing jointly)

✅ Report foreign financial accounts if the total value exceeds $10,000 (FBAR requirement).

✅ Report foreign assets if they exceed $200,000 abroad or $50,000 in the U.S. under FATCA reporting rules.

✅ Pay U.S. taxes on worldwide income, even if you already pay taxes in your country of residence.

Many accidental Americans discover their tax liability when their foreign banks restrict their accounts due to FATCA reporting requirements, which require foreign banks to report accounts held by U.S. citizens to the IRS.

Do Accidental Americans Have to File a Tax Return?

Yes. For accidental americans, tax returns are just as important as any other American. Unless you renounce U.S. citizenship, you are legally required to:

📌 File a U.S. tax return annually (Form 1040), regardless of where you live.
📌 Report foreign bank accounts (FBAR – FinCEN 114) if balances exceed $10,000 at any time during the year.
📌 File FATCA Form 8938 if foreign assets exceed IRS reporting thresholds.
📌 Pay U.S. taxes, unless you qualify for exemptions or credits such as the Foreign Tax Credit (FTC) or Foreign Earned Income Exclusion (FEIE).

Many accidental Americans owe little to no U.S. taxes but are still required to file returns.

IRS Relief Options for Accidental Americans

For any accidental American, IRS actually provides certain relief and amnesty options such as the following:

1. Accidental American Amnesty: IRS Streamlined Filing Procedures

The IRS Streamlined Filing Compliance Procedures help non-compliant accidental Americans become IRS-compliant without penalties if they unintentionally failed to file. This program allows you to:

✔ File three years of back tax returns.
✔ Submit six years of FBAR reports.
✔ Avoid fines and penalties if tax non-compliance was unintentional.

The streamlined procedure is one of the most common solutions for accidental Americans looking to catch up on their U.S. tax obligations.

2. Renouncing U.S. Citizenship

For accidental Americans who no longer wish to remain U.S. citizens, renouncing U.S. citizenship is an option to eliminate future tax obligations. However, the process requires:

• Filing a final tax return and completing Form 8854 to document your financial status.
• Paying an exit tax if your net worth exceeds $2 million or if you’ve failed to file past tax returns.
• Proving tax compliance for at least five years before renouncing to avoid penalties.

Renouncing U.S. citizenship is a permanent decision and can have implications on travel, inheritance, and visa status. It is advised to consult a tax professional before pursuing this route.

How to File U.S. Taxes as an Accidental American

If you are an accidental American, taking the right steps to meet your U.S. tax obligations is essential:

📌 Step 1: Determine whether you need to file past-due tax returns.
📌 Step 2: Claim available tax credits or exemptions, such as the Foreign Tax Credit (FTC) or Foreign Earned Income Exclusion (FEIE), to reduce U.S. tax liability.
📌 Step 3: File FBAR & FATCA forms if you have foreign bank accounts or assets exceeding IRS reporting thresholds.
📌 Step 4: If you are behind on filings, consider using IRS Streamlined Filing Compliance Procedures for penalty-free tax compliance.
📌 Step 5: If you no longer wish to hold U.S. citizenship, explore renouncing U.S. citizenship while ensuring all IRS obligations are met.

Accidental Americans can take advantage of IRS relief programs to avoid penalties and ensure tax compliance without unnecessary financial burdens. If you are unsure how to proceed, consulting a tax professional is highly recommended.