What is an Accidental American
What is an Accidental American and what does this mean to me?
An Accidental American is a person who was born in the US but may have left at a very young age and therefore, may be holding the US nationality.
Often people do not discover they are an Accidental American until they encounter problems opening a non-US bank account. Banks and other financial institutions are required by law to check for US connections and report these to the IRS. As a result, opening a new bank account or making a new investment can often inadvertently raise a US tax compliance issue.
What are the implications of being an Accidental American?
As an Accidental American, you will be required to disclose your worldwide income and non-US financial accounts every year. Failure to meet these obligations can have serious consequences.
However, the US federal tax authority has introduced various tax amnesty programs over the past two decades to help filers regularise their tax status. The Streamlined Foreign Offshore Procedures (Streamlined) was introduced in 2012 and is possibly the most popular program used by US citizens abroad to get back on track with their US tax compliance.
One of the main benefits of this system is the reduction in penalties for late submission and non-compliance penalties for all delinquent years. In order to meet the criteria for the Streamlined program a US person must meet three conditions:
- The individual may not be residing in the US
- The individual may not be under audit or examination by the US tax authority
- The individual may not have acted deliberately (non-wilful)
If you meet these criteria you must submit the following information together to a special unit dedicated to Streamlined individuals:
- US federal tax return for the last three years for which the filing due date was missed;
- FBARs for the last six years for which the FBAR filing due date was missed;
- Complete and sign a non-willful certification statement, Form 14653;
- A payment for the outstanding taxes owed for the three years, including arrears interests.
“Streamlined” is a great program allowing non-willful individuals to get back into compliance with reduced penalties. The program was set up as a temporary approach to solving late filing issues with US expats. There is some discussion around how long it will last, therefore if you are considering this program use it sooner rather than later to avoid missing out on a cost-effective method to be US tax compliant.
Jarem Accountancy have been preparing American taxes for Americans living in the UK for the last 10 years, if you need any help with your American Tax or just have questions you need to ask get in contact with us straight away
