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The Inadvertent USC:
An individual born in the US is a USC, you have both feet in the US tax system even if you do not know you are a USC or never exercised any rights such as obtaining a social security number or a US passport. In addition, those who were born outside the US to at least one USC parent may likewise be a USC. The US Supreme Court has held that these individuals have tax return filing and tax payment obligations the same as someone living on Main Street, USA, even if that person has absolutely no ties to the US other than the accident of birth.
If this fact patterns applies to you, to do nothing, simply means that you will have a growing problem to eventually contend with. You may conclude that the IRS will never find out that you, or your father or mother were born in the US, but we are in an age of increasing international financial transparency and coordination between tax authorities, you simply do not know what could surface and when. If your affairs bring you to the US a spotlight will shine on this problem as reporting your place of birth is required for most visa and similar applications.
Many in this situation conclude that they are paying foreign tax at higher rates and therefore no US tax is owed. This may be true but you have to file a US tax return. To continue to not file US returns could cross the line into a criminal issue.
The problem goes beyond filing US tax returns and tax payments. Due to a few notorious cases, our politicians and bureaucrats view offshore economic events with a high degree of suspicion. The presumption is that US tax avoidance is involved. A complex reporting regime (the “$10,000 Penalty Regime”) has been established with significant penalties for violations. For example, a simple failure to timely file an information return about foreign bank or financial accounts in excess of $10,000 can generate a penalty of $10,000.
The Reluctant USC:
The “reluctant” USC is someone who has full knowledge that they are a USC but whose life has taken them outside the US on a more or less permanent basis. They essentially have few if any economic or legal ties to the US.
These individuals are simply unaware of the long-term complications and often unaware of current exposures as our politicians continue to target “offshore” economic transactions with costly penalties for mere “foot fault” failures to file a form on time. .
They file US tax returns (probably late) but their affairs are becoming more complex and they are surprised to learn of the increasing burden that the US tax system will put on them and the disadvantage they are at with respect to retirement and estate planning (especially when it comes to non-citizen spouses which is becoming the norm for many international families). See “USC – The Price Tag”, below.
For example, there are information returns that are due on a specific date typically with a $10,000 penalty for failure to report in a timely fashion.. See Bank Accounts - Non-US. Since the "Reluctant USC" by definition is fully aware of his status, he will be hard-pressed to offer a "reasonable cause" for escaping the $10,000 penalty regime for failure to file information returns timely.
Few "Reluctant USC" appreciate the problems here until it is too late.
If this fact patterns applies to you, to do nothing, simply means that you will have a growing problem to eventually contend with. You may conclude that the IRS will never find out that you, or your father or mother were born in the US, but we are in an age of increasing international financial transparency and coordination between tax authorities, you simply do not know what could surface and when. If your affairs bring you to the US a spotlight will shine on this problem as reporting your place of birth is required for most visa and similar applications.
originally posted by: ChaoticOrder
a reply to: 8675309jenny
If this fact patterns applies to you, to do nothing, simply means that you will have a growing problem to eventually contend with. You may conclude that the IRS will never find out that you, or your father or mother were born in the US, but we are in an age of increasing international financial transparency and coordination between tax authorities, you simply do not know what could surface and when. If your affairs bring you to the US a spotlight will shine on this problem as reporting your place of birth is required for most visa and similar applications.
Haha... basically they're saying they can't do anything about it unless you travel to the US. Simple solution is just to stay away from the US and pay no attention to their ridiculous legal threats.
there it is right there...i wonder what they would do if i burnt my U.S passport...extradite me ....lol...i left the country when i was 5 and have no intentions on returning
originally posted by: BasementWarriorKryptonite
a reply to: DJW001
It doesn't seem so long ago - actually, it wasn't that long ago - that to be an American citizen was like being a Roman citizen way back when it meant you were almost untouchable and so, so lucky.
I'm sure I'm not the only one who's head is spinning with how fast that all unravelled. It's just...bewildering. How? How did it happen?
Can anyone even say when it happened - it just sort of crept up on everyone.
originally posted by: BasementWarriorKryptonite
The best thing to do is get all the homeland sightseeing you ever want to do, done and then get the heck out of there. Of course, there are worse places in the world to be, but also better - much better.
It's funny that that would raise the thought of patriotism and heartfelt feelings of our childhoods and all that rubbish but lets' face it - that is all gone and blown to smithereens now, anyway.
Don't let any of that hold you back from your own decision, based on the future and not the past.
originally posted by: Iamthatbish
I learned of this at tax time.
Did you know that the USs tax laws are causing banks to decide it's easier to stop doing business with American citizens?
I was reading the horror stories people were going through for hours! I couldn't believe the stupidity of some of the laws.