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Whaddaya mean I’m an American? H


David Costello explains what to do if you find you’re an Accidental American


ave you ever wondered what it is like to wake up in the morning and find out you are a citizen of a different country? Prob- ably not, but many people outside of the USA have been increasingly discovering what this feels like. Since the appearance of FATCA


(the Foreign Account Tax Compliance Act) a few years ago non-US banks have been sifting through their cli- ents to identify who is American and this has created a multitude of Acci- dental Americans seeking legal, tax and financial assistance. Anecdotes include students


applying for a visa to study in the US and being sent a passport instead, to UK citizens with a US parent assum- ing they were not American because they were not born in the USA. So how can you not be, but be


American? The rules are at once clear and confusing. In the simplest terms you are American if you are: 1. Born in the United States or one of its territories (unless born to dip- lomats or other recognised govern- ment officials from foreign countries); 2. Born to US citizen parents; 3. Naturalized; 4. Born to naturalized parents. That was the easy bit. If you were born abroad you may or may not


be an American citizen depending on when your American parent was born and how much time they spent in the US. Confused? So are most people who are affected by this. There is a helpful link to the US Citi- zenship and Immigration Services at the end of this article – most people require the services of an attorney to solve the puzzle. Suffice to say the US government never ceases to hand out passports and request taxes! But what about the real implica- tions of suddenly finding out you are a US tax-payer? In our experience most individuals who have never been exposed to American


culture and


don’t consider themselves American reach for the phone and call any of a number specialist lawyers or account- ants based in the UK to get help expatriating (that is renouncing their American citizenship). During this call they will find out that the US govern- ment does not let go lightly and that, if their net total assets exceed $2m, they will be subject to an exit tax. Given a homeowner in central London is likely to own a house that will take their wealth to this level you can imagine how this information is received. (It is worth noting that a minor can relin- quish citizenship before age 18.5 so long as they did not reside in the US


for more than 10 years). If expatriation is not an option


then the Accidental American must now consider the following: they are required to file their


income and gains to the Internal Rev- enue Service every year, regardless of whether any tax is due; previously tax exempt or deferred


wrappers such as ISAs, VCTs, etc will be taxable by the IRS; gains made in non-US collective


investments will be taxed in the US as income. This list is not extensive and


becomes more complex when you take into account gifting, inherit- ance tax planning and saving for children. There are a number of pro- fessional service, legal, tax and finan- cial advisory firms in the UK who are well placed to help in the event you discover you are American. It need not be a disaster and, indeed, your financial affairs can be managed effi- ciently between the two tax jurisdic- tions allowing you to benefit from your newly acquired passport. And who knows maybe you will find out that you really enjoy baseball! www.uscis.gov/us-citizenship/citi- zenship-through-parents www.irs.gov/Individuals/Interna- tional-Taxpayers/Expatriation-Tax


David Costello is a Partner at Tanager Wealth Management LLP. Tanager Wealth Management LLP is authorized and regulated by the Financial Conduct Authority in the UK and is an SEC Registered Investment Advisor. Tanager Wealth Management LLP does not provide tax advice. You should seek specialist tax advice from a suitably qualified tax professional. www.tanagerwealth.com


18 The American


Accidental American Boris Johnson


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