Being An Accidental American: A Tax Perspective

While being an American citizen comes with many privileges, it also comes with a host of tax obligations. This is where things get tricky for accidental Americans – people unaware of their U.S. citizenship. In recent years, the issue of accidental Americans has garnered attention due to the increasing global mobility and their potential to face significant financial consequences in the United States.

In this article, we will explore the challenges they are facing and discuss strategies for avoiding the tax implications of accidental citizenship.

Who Is an Accidental American?

An accidental American is a term used to describe someone who holds dual citizenship in the United States and another country, but is unaware of their U.S. citizenship status. They may have acquired U.S. citizenship even if they have never lived in the States or have only spent a limited amount of time in the country. For many accidental Americans, the discovery of their citizenship comes as an unpleasant surprise – often through a realization of the tax filing obligations to the United States.

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IRS Amnesty Programs for Accidental Americans and other late filers

The post was written by Kasia Strzelczyk of the 1040 Abroad Team.

It doesn’t come as a surprise that the IRS will be filling the budget hole in 2023 by cracking down on non-compliant U.S. citizens living abroad. Even expats that didn’t know about their debt may face some serious penalties and fines. To address your tax issues and take control of the situation – start learning about Tax Amnesty Programs the IRS offers. These procedures can help you come clean about your U.S. taxes while escaping all undesirable consequences.

What is a tax amnesty program?

The IRS is aware that many American Expats don’t know about their filing obligation to the U.S. The tax amnesty programs can be seen as a way to “clean the slate” and start fresh with regard to tax compliance. It allows delinquent taxpayers to pay their debt in exchange for avoiding severe tax penalties, and interest too.

Most expats who find themselves in the position of not having satisfied their U.S. tax obligations may feel as if fixing the situation is daunting. Contrary to popular belief, the financial consequences of your failure to file before may not be as severe as one might expect.

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U.S. Expat Tax Deadlines For 2023: What You Need To Know

With so much going on in our lives, it’s easy to get distracted and forget to pay attention to important things – like filing taxes on time.

Missing your deadline can result in some dire consequences, so we decided to help you out! Here’s a list of all the important dates and other useful information to help US expats stay on track with their taxes in 2023.

US Expat Tax Return Deadline For 2023

Residents of the United States are required to file a Federal Tax Return by April 18, 2023. One perk of being a US expat is that you’re given an extended deadline to file your tax return. That means that all US citizens living abroad will be granted an automatic two-month extension to June 15, 2023.

In case you’re worried about getting your taxes done by June 15, you can request an additional 6-months extension. Contact us today if you think you require more time to file your U.S. Expat Tax Return, and we’ll file an extension for you free of charge.

Due Dates For American Expats

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Guide To Renunciation Of U.S. Citizenship Abroad

In this guide, we’ll discuss everything you need to know about the process of renouncing your U.S citizenship, how to book an appointment, waiting times you might expect, forms you need and how to complete them, interview tips and we’ll discuss the most common concerns US citizens have when renouncing your US citizenship. Everything we refuse to charge additional fees for because we believe that you can do it all yourself.

We understand that renouncing US citizenship is a life-altering decision that comes with an enormous amount of stress, doubt, and anxiety. We get many requests each week to help people prepare for their renunciation appointment.

We firmly believe that equipt with the knowledge you’re about to process, you can eliminate the stress and ease your anxiety. In fact, the process is simpler than you might think. At the end of the day, it is your right to decide whether you consider yourself to be a US citizen or not.

Renunciation Process

Section 349(a) of the Immigration and Nationality Act (INA) (8 U.S.C § 1481) governs the right of a U.S.citizent to renounce his or her U. S. citizenship. A person loses his/her U.S. citizen status if he/she voluntarily gives up his/her U. S. citi­zenship with the intent of relinquishing his/her U.S. citizenshi­p, making a formal renunciation before a diplomatic or consular officer of the United States in a foreign state.

In order for you to legally renounce your U.S. citizenship, you must:

1) appear in person before a U.Ss consular or diplomatic officer
2) in a foreign country at a U.S. Embassy or Consulate; and
3) 
sign an oath of renunciation

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Guide To U.S. Inheritance And Estate Tax For US Expats

Are you worried about paying inheritance tax in the United States and your country of residence? In this guide, we’ll discuss what the inheritance tax is when it’s taxable and what tax obligation you might have in relation to inheriting an estate.

Losing a loved one is often an emotionally charged and complicated process. Things can get even more complicated by different laws and regulations if you’re inheriting property from someone who lives overseas or you reside abroad. It’s important to understand how US inheritance tax laws might impact you.

What Is Inheritance Tax?

The term “inheritance” refers to the transfer of wealth from a deceased person to his or her heirs. This includes real estate, stocks, bonds, cash, bank accounts, retirement plans, life insurance policies, etc. Inheritance tax is a state tax that you pay when you receive money or property from the estate of a deceased person.

What Is an Estate?

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The IRS Received $80 Billion And It Fueled Fear Tactics

The Biden administration is granting the IRS an extra $80 billion under the newly passed Inflation Reduction Act

I have seen some of my competitors use it to fuel their fear tactics like the example below published by Moody’s and I must address it.

“Overall with the 87,000 new agents the IRS will become larger in numbers than the Pentagon, State Department, FBI, and Border Patrol combined. Many are arguing the US could certainly use 87,000 more teachers, nurses, mental health workers or border agents who are stretched thin right now at the Southern Border – before IRS Agents. But let’s remember that those much needed hires wouldn’t result in the return on investment that 87,000 IRS Agents will. And they get to carry a gun.

This move allows the IRS to go into what the Wall Street Journal calls “beast mode”. They will be focused on bill enforcement and collection like never before, and someone is going to have to foot the bill for this extravagant spending. So, who do you think the IRS will target with future audits to help recoup the costs? You and the other 9+ Million U.S. Citizens living abroad?”

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Cryptocurrency And NFT Taxation For U.S. Expats

The United States Internal Revenue Service (IRS) does not recognize cryptocurrency as currency for federal income tax reporting purposes. However, it does recognize certain types of virtual currencies as property for capital gains and losses. If you are an American citizen living abroad and hold crypto assets, whether those assets are purchased directly or indirectly, you must report them on Form 8949, Sales and other Dispositions of Capital Assets.

MetamaskIn addition, if you trade digital currencies for profit, you must pay taxes on the gain or loss. You must determine what type of cryptocurrency you sold, and use the appropriate form to report the sale. For example, if you bought bitcoin in 2017 and sold it today for $10,000, you must report the transaction on Form 8949, Schedule D, Capital Gains and Losses.

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A Lesson On Cryptocurrency And Taxes

Welcome. I am Olivier Wagner from 1040 Abroad and will provide an overview of taxation of cryptocurrency, Non-Fungible Tokens (NFTs), and Decentralized Finance

First disclaimer: While cryptocurrencies and NFTs have been gaining traction, these are an extremely volatile asset class.

Likewise, it’s an ever-changing environment, so please contact me before taking anything here as true as it may have changed.

Let’s start with a review of blockchain and the building block that lead us to where we are today.

We have building blocks:
– Blockchain
– Cryptocurrency
– Smart Contracts
– Tokens

Blockchain

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Are You Entitled To A Tax Refund When You Live Abroad?

We’ve been getting a lot of inquiries about tax refunds for U.S. citizens who live abroad. If you live in the U.S., your refund would be directly deposited to your account. Once you move overseas, receiving a refund becomes more complicated as many U.S. Expats no longer keep their U.S. bank account.

Since the refunds cannot be deposited to a foreign bank account, taxpayers living overseas receive a check instead. However, these can take month to arrive. There are few things you can do to ensure you receive your refund faster.

Receiving A Tax Refund For U.S. Citizens Abroad

Receiving a tax refund is surely the best thing about filing your U.S. Expat Tax Return. You cannot imagine how much joy it brings us to inform our clients they’re now not only compliant, but they are actually due a refund. Many taxpayers are simply not aware of the credits they are eligible for. The additional child tax credit is the most common example of a tax credit U.S. expats don’t know about.

Although many expats receive refunds every year, there are ways to speed up processing of your refund. Most U.S. citizens abroad receive their refund in a mail, often waiting even months for their checks. In this blog post we’ll discuss the ways to ensure your refund isn’t delayed.

Are You Entitled For A Tax Refund When You Live Abroad?

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Filing Form 1116 Foreign Tax Credit (With Examples)

When talking about US taxes and taxation of US citizens who live abroad, you may have heard of Foreign Tax Credit. A U.S. citizen or resident alien who pays income taxes in another country can claim a tax credit against their U.S. federal income tax bill. You can offset your US tax liability by claiming the foreign taxes paid to another country. This way, you can bring your tax owing down to zero.

What is Form 1116 and who needs to file it?

You must complete Form 1116 in order to claim the foreign tax credit on your US tax return. The form requests the information about the country your foreign taxes were paid in, the value of foreign taxes paid and the types of income.

Most of the US international tax experts prefer claiming Foreign Tax Credit (Form 1116) on client’s U.S. tax return rather than the Foreign Earned Income Exclusion.

Read further to learn about how to file Form 1116 Foreign Tax Credit and why it is a better way to save money on your US expat taxes.

Related: Foreign Earned Income Exclusion vs. Foreign Tax Credit: which one is better? (Infographics)

Advantages of Foreign Tax Credit and General Rules

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OLIVIER WAGNER - Foreign Earned Income Exclusion for US Expats

Even if you’ve moved abroad for a brighter future, you still might have obligations towards the IRS. What happens if you earn income from sources outside the United States? If you live abroad, you might qualify for the foreign earned income exclusion (FEIE). This article explains what FEIE is and how it works, and provides some examples of situations where you might benefit from claiming it.

The U.S. retains its right to tax citizens and Green Card holders who live abroad and they must file their taxes even if they’re not physically present in the country. The foreign earned income exclusion (FEIE) allows U.S. taxpayers to exclude from their taxable income certain amounts they earn outside the United States. The FEIE was created in 1954 to relive American Citizens from the burden of double taxation when they move overseas.

What is the Foreign Earned Income Exclusion?

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U.S. / Canadian Treaty Relief From Double Taxation

Those who renounce their U.S. citizenship and those who have severed ties with Canada and become non-residents risk being taxed twice: once for assets they owned, giving up tax residency, and another time when they sold their assets.

The double taxation issue is primarily resolved for expats living in Canada but not (as far as I know) for residents of other countries.

What is the double taxation problem?

Let’s first talk about what double taxation is. This is because both countries want to tax you, and neither country cares whether the other taxes you or not.

Two countries claim you.

If you are a taxpayer in two different countries, both countries will enforce their tax laws against you and insist on your right to enforce a tax on your income.

Example

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