As a quick follow-up to yesterday’s post, the greatest unfairness again occurs to the accidental American who realizes after the fact his/her status of a US citizen self-employed in a country without a Social Security totalization agreement with the US.

In order to relinquish US citizenship without becoming a covered expatriate, as an Accidental American he/she would have to certify compliance with US tax laws and that would require payment of the self-employment tax. Again, since he/she would have learned about it after the fact, there wouldn’t be any opportunity to plan it, avoid it by creating a Controlled Foreign Corporation.

The self-employment tax would be 15.3% of his/her earnings over the past 5 years – a large amount of money for which in most cases no benefit would later be received.

Who is an Accidental American?

An Accidental American is a citizen of a foreign country other than the U.S. who may be considered an American citizen under the U.S. nationality law. This rule leaves an opportunity to pass citizenship through a few generations without people realizing it. You do not have to register with the U.S. government or apply for a passport to become a U.S. citizen.

Are you an Accidental American?

Typically, you only discover as an adult that you are a U.S. person. There are different ways that you could have obtained American citizenship without being aware of it, which are:

  1. By being born in the foreign country to one U.S. citizen parent who emigrated from the U.S.
  2. Or you were born in the U.S. to foreign parents who were temporarily residing in the country for work, study or other reasons, and then returned to their home country shortly afterward.
  3. Or by acquiring another citizenship, thinking that it ended the American one. 

Read more here.