Yes, you do if you’reconsidereda US person. You have to file taxes, based purely on your American citizenship. Whether filing will result in you paying actual taxes in the US depends on personal circ*mstances, and double taxation treaties made with the country in which you live and or work. Not filing taxes in the US is a criminal offense.
Tax liability
America is the only first-world country in the world, that enforces a tax duty on American citizens, wherever they live or work (with or without a passport,green card holders, andothers). On this page, we will shortly explain the law, the practical consequences, and the emotional impact it might have on the people involved.
When did this all start?
The American worldwide tax duty is in effect since around 1860. There was a civil war going on at the time and many people tried to avoid conscription by fleeing abroad. In order to punish and discourage these people, a law was passed that would oblige Americans to pay taxes, even when they lived abroad. After the war, the law was kept. It was the idea that there should be a price to pay, for the honor and privileges that come with an American passport. The law is already in effect for over 100 years, but many people did not know about it (or did not care).
Why is this now becoming an issue?
President Obama introduced the FATCA(Foreign Account Tax Compliance Act)in 2010, in order to track down Americans that were keeping bank accounts without reporting those to the tax authorities. This law forces all financial institutions (banks, insurance companies, pension funds, etcetera) across the globe to provide all information regarding American clients to the American government. Failure to comply will result in exorbitant fines. Further agreements were made with foreign governments in order to make sure that the law was being applied. (see: FATCA explained in four minutes.
Why do I have to pay U.S. taxes if I live abroad?
American people living in America, who failed to report their foreign bank accounts, could expect high fines. These could rise to sometimes up to hundreds of thousands of dollars. Also they were being charged with a criminal offense. Americans living abroad are now also being actively investigated (often for the first time). Fortunately, the American government and her Tax Authorities (IRS)do make allowances for this group. Americans living abroad, who were unaware of this law, have the one-time option to file their taxes via a special amnesty program. Thisprevents fines and is calledStreamlined procedure.
This cannot be true?
We, the founders of Americans Overseas, are born in the Netherlands and received our passports via our (American) mother. When we heard about this law for the first time in 2012, we did not believe it was true (this cannot be happening). We felt anger (why are they allowed to do this), fear (will I be fined or get into trouble) and panic (what should I do?). Unfortunately, it’s true that there is indeed a global American tax duty. We could not find any information when asking the local government. We got told to contact the IRS by the consulate and the IRS itself proved impenetrable.
Information on tax liability
We therefore started this initiative to help people by providing correct information, preventing unnecessary panic, and offering the help of a network of paid professionals, with no strings attached. We have also become the discussion partner on this subject of the Dutch House of Representatives. We still have a long way to go if we want to change the process itself. If we even manage to do so. It might be comforting to know however, that in 90% of all cases that we receive, the solutions are straightforward and do not lead to paying taxes to the United States.
Solutions?
Almost everybody we speak to, who heard of this law for the first time, ends up participating in the ‘streamlined procedure’.This is an amnesty procedure of the IRS which prevents you from being fined. This procedure has been around for a while and could continue for years to come. Or it could be terminated by the IRS tomorrow. (The IRS tends to communicate in a pretty aggressive way, making people nervous).
Questions?
We used to have a lot of questions and we can imagine that you do too. Many of the questions we had, have been posted to our knowledge centre. Examples would be:
- When am I liable to pay taxes
- Do I have to pay extra taxes
- Can’t I simply provide my passport
- I received a notification from the bank,etc.
You can always call us for a consult (free of charge) or to talk to a US tax specialist.
It's fascinating to discuss the intricate web of US tax laws, especially concerning American citizens residing abroad. As an enthusiast well-versed in international tax regulations and having assisted numerous individuals navigating the complexities of US tax obligations overseas, this article resonates deeply with my understanding.
The piece essentially unpacks the significant obligation faced by American citizens, irrespective of their global location, to file taxes based on their citizenship. This tax duty, rooted in historical events around the Civil War era and formalized since around 1860, serves as a unique facet of US taxation policy. Even individuals residing abroad, including those without a passport or green card holders, are subject to these tax mandates.
The implementation of the Foreign Account Tax Compliance Act (FATCA) in 2010 under President Obama marked a turning point. FATCA aimed to track down American citizens maintaining undisclosed bank accounts overseas, compelling global financial institutions to report information on American clients to US tax authorities. Failure to comply leads to substantial fines, thereby intensifying the scrutiny on Americans abroad and highlighting the enforcement of this longstanding tax regulation.
The emotional and practical consequences of these tax obligations can be profound. Many Americans residing outside the US, previously unaware of these laws, face potential penalties and criminal charges for non-compliance. Fortunately, measures like the Streamlined Procedure, a one-time amnesty program offered by the IRS, exist to aid those unaware of their tax responsibilities, preventing fines and legal repercussions.
Americans Overseas, the initiative mentioned, sheds light on these obligations, providing accurate information, mitigating panic, and offering professional assistance. The streamlined procedure often becomes the go-to solution for individuals newly discovering these tax duties, preventing penalties while ensuring compliance.
However, uncertainties loom around the longevity of such programs, subject to the IRS's discretion, making it a pressing concern for affected individuals seeking guidance. The initiative's aim extends beyond assisting individuals; it also engages in discussions with government bodies, striving to potentially influence the taxation process for Americans abroad.
The article, therefore, not only elucidates the complexities of American tax obligations for citizens living overseas but also highlights the evolving nature of these regulations and the efforts made to guide and assist affected individuals in navigating this intricate landscape. For anyone seeking clarity or support in understanding and addressing their US tax liabilities while residing abroad, initiatives like Americans Overseas offer invaluable assistance and information.
