Could you be an ‘Accidental American’ with tax obligations?
The Duke and Duchess of Sussex have proudly announced the birth of Baby Sussex, and the Royal Tax Accountants are preparing for an increased workload. With the Duchess’ American citizenship, Baby Sussex will be deemed to be a U.S. citizen and as such liable to pay U.S. Federal Income Tax.
It is a timely reminder that as an ‘Accidental American’ which Baby Sussex will become, many individuals residing in foreign countries that may hold American citizenship because they were born there, or have automatically received the citizenship status from their parents, could have a requirement to file an annual Federal Tax Return to reporting on their worldwide income and this may apply, regardless of whether they have even lived there.
So if you are a U.S. national living abroad, or fall into the “Accidental American category” what do you need to consider? The answer is unfortunately quite a lot, however through diligent reporting and planning it is possible to avoid many unnecessary additional liabilities and reporting exposures enabling you to effectively manage two separate tax systems.
The key areas to consider annually are:
Do I actually need to file?
Are my returns up to date and if not can I take advantage of the Foreign Offshore Streamlined Procedures to get up to date?
Have I reported everything on my Federal Tax Return and correctly?
Have I declared my non-U.S. bank accounts and investment accounts – The FBAR declaration?
What about my private and state pensions – how are they taxed?
Do I need to declare any gifts and inheritances I have received and are there implications for me, even if they came from a non-US national?
While tax liabilities can be mitigated, failure to report your tax affairs annually and correctly with the IRS can prove to be extremely costly in some circumstances. Substantial penalties exist for any failure to declare your income, investments and assets correctly, and by avoiding doing so, you can find yourself with significant issues to deal with beyond simple additional tax, interest and penalties.
Our experienced team at Everfair Tax is well equipped to help both the up to date taxpayer, as well as those individuals who want to address their US tax filing responsibilities. If you would like some assistance, please call our friendly team on 01932 320800, email firstname.lastname@example.org , or visit our website www.everfairtax.co.uk