Accidental Americans
- U.S. citizenship creates a tax filing obligation regardless of where you were born, where you live, or whether you have ever resided in the United States
- Accidental Americans who have never filed U.S. tax returns are not alone — and there are formal IRS programs designed specifically to help you come into compliance without penalties
- Getting compliant is a prerequisite for renouncing U.S. citizenship — you cannot relinquish citizenship with unfiled returns outstanding
- AET has helped many accidental Americans navigate compliance and, where applicable, the renunciation process
An accidental American is someone who holds U.S. citizenship — and the tax obligations that come with it — without having chosen it in any meaningful sense. The most common situations include:
- Born in the United States to foreign parents who returned home shortly after
- Born outside the United States to at least one U.S. citizen parent
- Born in the United States while a parent was temporarily working or studying there
- Naturalized as a U.S. citizen as a minor when a parent naturalized, without awareness of what that meant
What these situations share is that U.S. citizenship was acquired by circumstance rather than intention — and in many cases, the person has spent little or no time in the United States, has no meaningful connection to the country, and had no idea they had U.S. tax obligations until a bank asked them to fill out a FATCA form.
The United States is one of only two countries in the world — the other is Eritrea — that taxes its citizens on worldwide income regardless of where they live. This is called citizenship-based taxation, and it applies to every U.S. citizen, including accidental Americans.
It doesn’t matter that you’ve never worked in the United States, never received U.S. government benefits, or have spent your entire life in another country. If you hold U.S. citizenship, the IRS considers you a U.S. taxpayer.
For most accidental Americans, this comes as a surprise — often triggered by a foreign bank’s FATCA compliance requirements, a financial advisor flagging potential issues, or research prompted by a major life event like selling a property or retiring.
If you are a U.S. citizen — accidental or otherwise — living outside the United States, your obligations generally include:
Annual tax return (Form 1040)
You are required to file a U.S. federal tax return each year, reporting your worldwide income. This applies even if you owe no U.S. tax, which is often the case for accidental Americans who can use the Foreign Tax Credit or Foreign Earned Income Exclusion to offset their U.S. liability.
FBAR (FinCEN 114)
If you had more than $10,000 in foreign bank or financial accounts at any point during the year — across all accounts combined — you are required to file an FBAR. This is a separate filing from your tax return, submitted to FinCEN rather than the IRS. Penalties for non-filing can be significant.
FATCA reporting (Form 8938)
If your foreign financial assets exceed certain thresholds — $200,000 at year end or $300,000 at any point during the year for single filers living abroad — you are required to report them on Form 8938, filed with your tax return.
Other information returns
Depending on your financial situation, you may also have obligations related to foreign pension plans, foreign trusts, or ownership interests in foreign corporations. These are identified during the tax preparation process.
Most accidental Americans with straightforward financial situations — employment income, local bank accounts, a pension — owe little or no U.S. tax once available exclusions and credits are applied. The obligation is primarily one of filing, not payment.
most accidental Americans with straightforward financial situations — employment income, local bank accounts, a pension — owe little or no U.S. tax once available exclusions and credits are applied. The obligation is primarily one of filing, not payment.
If you have never filed U.S. tax returns and are now aware of your obligations, the IRS has a formal program designed for exactly this situation: the Streamlined Foreign Offshore Procedures (SFOP).
The Streamlined program allows eligible taxpayers to come into compliance by filing three years of back tax returns and six years of FBARs, with no penalties — provided the non-compliance was non-willful. Non-willful means you were unaware of your obligation, which is the case for the vast majority of accidental Americans.
Who qualifies for Streamlined Foreign Offshore Procedures?
To use the foreign version of the Streamlined program, you must meet the non-residency requirement: you must not have had a U.S. abode and must have been physically outside the United States for at least 330 days in at least one of the three years covered by the submission.
What does a Streamlined submission include?
- Three years of amended or original Form 1040 returns
- Six years of FBARs
- Payment of any tax due plus interest (penalties are waived)
- A signed certification that the non-compliance was non-willful
What if I don’t qualify for Streamlined?
If you spent significant time in the United States during the covered period, or if your non-compliance may be considered willful, there are other options including the Delinquent FBAR Submission Procedures and the Voluntary Disclosure Program. A consultation is the right first step to determine which path applies to your situation.
Some accidental Americans, once they understand the ongoing compliance burden, decide that renouncing U.S. citizenship is the right long-term choice. That is a personal decision with significant implications — tax, legal, and practical — and it is beyond the scope of this article to advise on it.
What is important to understand from a tax perspective:
You must be compliant before you can renounce. The IRS requires that you have filed five years of U.S. tax returns before your renunciation is recognized for tax purposes. If you have unfiled returns, getting compliant — typically through the Streamlined program — is the necessary first step.
Renunciation may trigger an exit tax. U.S. citizens who renounce citizenship and meet certain net worth or tax liability thresholds are subject to the expatriation tax under Section 877A, which treats covered assets as sold on the day before expatriation. Whether this applies to your situation depends on your specific financial circumstances.
Form 8854 is required. The Initial and Annual Expatriation Statement must be filed in the year of renunciation. Failure to file can result in continuing U.S. tax obligations even after renunciation.
If renunciation is something you’re considering, a consultation with an AET Tax Specialist is the right starting point.
AET has been working with accidental Americans for over 30 years. We understand the situation — the surprise of discovering an obligation you didn’t know existed, the uncertainty about what it means, and the concern about penalties for years of unfiled returns.
We offer two primary paths for accidental Americans:
The Safety Net — $3,750 Our dedicated compliance package for U.S. citizens with income below the filing threshold who need to establish compliance. Covers three years of returns under the Streamlined Foreign Offshore Procedures for straightforward situations — no PFICs, Form 8938, business income, rental income, or state return.
Consultations — $250 If you’re not sure where you stand or what you need to do, a 30-minute consultation with an AET Tax Specialist is the right first step. We’ll assess your situation, explain your options, and give you a clear picture of what coming into compliance involves.
Frequently asked questions
Almost certainly not in the way you might fear. The IRS Streamlined Foreign Offshore Procedures exist specifically for people in your situation — U.S. citizens living abroad who were unaware of their filing obligations. The program allows you to come into compliance without penalties, provided your non-compliance was non-willful. The vast majority of accidental Americans qualify.
Most accidental Americans with standard employment income living in countries with comparable or higher tax rates owe little or no U.S. tax. The Foreign Tax Credit allows you to offset your U.S. liability with foreign taxes paid, and the Foreign Earned Income Exclusion can exclude a significant portion of earned income. The obligation for most people is primarily one of filing, not payment.
Under the Streamlined Foreign Offshore Procedures, you file three years of back returns and six years of FBARs. You do not need to go back further than that.
Continuing to ignore a known U.S. tax obligation increases your risk profile significantly. FATCA has made it substantially easier for the IRS to identify non-compliant U.S. persons through foreign financial institution reporting. Acting proactively — especially through the Streamlined program — is always preferable to waiting for IRS contact.
Renunciation is a personal decision with legal and practical implications beyond tax. From a tax perspective, you must be compliant — five years of filed returns — before renunciation is recognized. Renunciation also does not eliminate any existing tax obligations and may trigger an exit tax depending on your financial situation.
It depends on the complexity of your situation and how quickly we can gather the necessary information. For straightforward cases, the preparation of three years of returns and six FBARs typically takes several weeks from the time we have all required documents.
It can, depending on the nature of those assets. Foreign pension plans are often treated as foreign trusts for U.S. tax purposes, which may require additional reporting. Foreign mutual funds may be treated as PFICs, which carry their own reporting requirements. These are identified and addressed during the tax preparation process — your AET Tax Specialist will flag anything that applies to your situation.
