Accidental Americans – Do you Need to Get Tax Compliant?
Did your bank mail you a letter enforcing FATCA?
Did the embassy inform you of your tax obligations?
Did you just hear at the last dinner party about how a U.S Citizenship automatically triggers tax filing requirements?
If you happened to stumble across to our page from any of those points, you might be panicking. We are here to say BREATHE – don’t stress. You are not alone and there is a rather straightforward process to get you back on the tax compliant track with the IRS…
Read on as we’ve compiled all the relevant information you’ll need in this one handy guide!
1) What is FATCA and What Does it Mean to You?
FATCA = Foreign Account Tax Compliance Act.
It is a US federal law that requires all non-US financial institutions to report their US customers’ financial records to the U.S. Department of the Treasury. If your foreign bank doesn’t comply with this standard, they will be hit with major business consequences and obstacles from the U.S.
Why does the U.S. Department of the Treasury need this info?
To prevent money laundering in “offshore” bank accounts. That’s why if your local bank manager finds out that you’re a U.S. Citizen they may very well freak out and possibly overreact by threatening to close your bank account.
Yes, you will have to fill out and sign lots of paperwork giving the U.S. Department of the Treasury access to peak into your bank details. However, unless you’re doing some illegal money laundering, they will most likely stay out of your stuff!
Hint: If the bank manager gives you a W8-BEN, please inform them that as a U.S. Citizen, the correct form for you is a W9.
We see this mistake happen way too often. On the W9, you will be asked for your Social Security number. If you don’t have one… make sure you read the following sections…
2) Fulfill your Annual Tax Obligations
Once you sign all that paperwork from the bank so that the IRS can look into your bank accounts (not tax those accounts directly, just look at them!) Then you will need to do the following on an annual basis – if you meet the reporting thresholds:
- Fill out the U.S. Tax Form 1040 and all the additional required forms
File the FBAR (Foreign Bank Account Report)
Yes, the obligations that come with having U.S. Citizenship can be complicated! But, it’s a (hopefully) small price to pay to be tax compliant. Plus you’ll have the opportunity to live and work in the United States whenever you so choose. So, if you’re still reading, that means you may need some help with the paperwork since you might not have all the American documents that you’ll need for this process.
3) Do you have a U.S. Passport?
Did you know less than half of U.S. citizens don’t have a passport? If you’re one of them, keeping reading as you might need it to be tax compliant.
Why do you need a U.S. Passport especially if you already have another country’s passport (like our Dual Citizens out there)? Short answer – you don’t really need one for taxes unless you don’t have a social security number yet. If you don’t have a U.S. social security number, then you will need a valid US passport to get one. If you don’t have a U.S. Passport, the full process steps can be found here.
Here are our tips to streamline your passport application process:
- Use Form DS-11, since it’s your first time applying for a U.S. Passport
- For Box 5: “Social Security Number” on Form DS-11:
- Either leave the boxes blank or enter in (000 00 0000)
- Find your closest U.S. Embassy/Consulate here.
- Check with the listed office BEFORE arriving at:
- Confirm the location for In-Person Passport Applications (can be at a different location than the official embassy)
- Make an appointment (if required)
- Check with the listed office BEFORE arriving at:
- Submit the following statement:
To whom it may concern:
I _____________________ (print full name) declare under penalty of perjury under the laws of the United States of America that the following is true and correct: I have never been issued a Social Security Number by the Social Security Administration.
Executed on: _______________________________
(Sign using full name as indicated on the passport application)
4) Do you already have a U.S. Social Security Number?
In order to become tax compliant, you will need to file your current year’s taxes and 3 years of back taxes (assuming you apply for the Streamlined Filing Compliance Procedure, detailed here). However, in order to complete and file your tax forms, you will require a Social Security Number (SSN). If you already have one – great! Move on to the next checklist item!
For many of you who obtained U.S. Citizenship by birth and have long since moved away, this might be a very foreign concept.
You might be thinking, why do I need a Social Security Number in the U.S. when –
- I don’t live or work in the U.S.
- I don’t get any social security benefits from the U.S.
- I don’t owe taxes (at least don’t believe I do)
- I have the equivalent of a social security number in my current home country
Unfortunately, your U.S. citizenship dictates your tax responsibility and so you will need to obtain an SSN for the pure purpose of filing your annual tax return to the IRS.
The full process to obtain an SSN can be found here. Scroll down to the section “How To Get A New, Replacement Or Corrected Card.” The instructions are quite straightforward and now you see why you need a valid U.S. Passport (as we assume you don’t have U.S. Driving License or other Identity Card…). We do advise you to submit the forms and documents in person, as additional documentation may be requested depending on your country of residence.
Unfortunately, not all countries have a social security service office so you may need to hop on a plane and travel abroad… If this is a case, please call your local embassy/consulate first to see if an appointment can be made at your local office instead. (Find the closest office with social security services here).
4) Waiting for your SSN application to be Processed
How do you start getting tax compliant while waiting?
No stress, because now the fun can begin!
But really, if you made it this far – congratulate yourself – the U.S. Passport and Social Security Number Application Processes were the hard parts. With MyExpatTaxes’ software and team, getting tax compliant is actually the easiest part:
- Create your account on MyExpatTaxes and experience our super user-friendly & fun (!) U.S. Expat Tax App.
- Gather the following information/documents:
- Current year (i.e. 2017) and the 3 previous years’ (i.e. 2014 – 2016) of salary information
- If you had more than $10,000 in TOTAL from all financial accounts located outside the U.S. then any statements with the maximum balance per account per year dating back 6 years (i.e. 2017 – 2011) You can always look for these documents later, while your tax returns are being completed.
- Review your tax forms, sign & submit!
… and that’s it! Let us know if you have any more questions or concerns. We got you!
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