Accidental Americans Stress Over Double Taxation Dilemma

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Thousands of accidental Americans living and working in Europe are frustrated with US tax policy that makes them pay up even if they left the country as children.

They are complaining that they are taxed by the Internal Revenue Service in a throwback law dating from the American Civil War in the 1860s.

Then, draft dodgers who refused to fight fled to Canada and the government ruled leaving the country was no reason to support the war effort and ordered they pay income taxes as if they still lived in the United States.

The real effect of this archaic law is being felt across Europe nearly 150 years later.

The Foreign Account Tax Compliance Act (FATCA) has led European banks and financial firms to disclose the cash and investments they hold for US nationals.

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Strangled by red tape

Many banks refuse to take on American customers because of the red-tape surrounding FATCA, which means American expats struggle to open checking accounts and arrange loans.

Republican George Holding has tried to put forward the Tax Fairness for Americans Abroad bill giving tax relief to expats, but the bill ran out of time in the last session of Congress, but plans an updated version.

He plans to offer American expats non-residential taxpayer status that would exempt them from filing income tax returns and reporting their overseas finances through FATCA and FBAR forms.

US laws mean expats pay tax on their worldwide income in America, but can deduct any tax they pay in other countries from what they hand to the IRS.

Boris Johnson is an accidental American

Many American expats in the UK are hoping Prime Minister elect Boris Johnson could step in to help them with their relationship with the IRS.

Johnson is an accidental American, who lived in New York as a child. He was pursued by the IRS, which presented him with a capital gains tax on selling a property in the UK even though he had no adult connection with the US except visiting on business and leisure.

Many dual nationality accidental Americans are considering handing back their passports – but even renouncing US citizenship comes with a cost as the IRS levies a one-off charge and expects taxpayers to bring their financial affairs up-to-date before departing.

And once gone, anyone handing back their passport is not welcome to return.

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