US Citizen for Tax Purposes?
Who is Considered a US Citizen for Tax Purposes: When a US Person is unaware they are a US Citizen, but learn later in life they are actually a US Citizen — it can come as a huge (and unwanted) surprise. This is especially true for individuals such as Accidental Americans. That is because for the US Citizen living abroad, they may have already been working for many years — and not filing U.S. tax returns or paying any taxes in the United States. The IRS operates on a worldwide income basis — which means that US citizens and other US persons across the globe are required to include their worldwide income on their annual tax filings each year with the IRS. In addition, the citizen may also have to file various international reporting forms for foreign accounts , assets and investments. The threshold question becomes — who is a U.S. citizen for tax purposes?
US Citizen for Tax Purposes
One of the simplest ways to become a US Citizen is to be born in the United States. When a person is born in the United states they are considered to be a US Citizen — absent and exception, exclusion or limitation.
Children of U.S. Citizens (Born Outside of the US)
Even when a person is not born within the United states, they may still be born a US Citizen — depending on whether their parents are considered US citizens or not. When both parents are U.S. citizens, then the US citizen birthright is essentially automatic — whereas if only one parent is a US Citizen, the rules are different and there are certain other requirements to be met.
Naturalization & US Citizen for Tax Purposes
A very common way for non US citizens to become U.S. citizens is to become naturalized. This is the process of proactively applying to USCIS and meeting all the requirements necessary to become naturalized. Becoming naturalized in the United states is usually a pretty detailed process that that may take several years from inception through completion — depending on the applicant’s status. Oftentimes, it requires at least five years of being a permanent resident — although sometimes this may be less when the permanent resident is married to a US Citizen.
Parents Become Naturalized as US Citizens
When a person is the child of a parents who become naturalized in the United states, they may also become automatically naturalized if they meet certain requirements and are under the age of 18 — as long as the child resides in the United states and had Legal Permanent Resident status.
Worldwide Income and Reporting
When a person is considered a US. citizen, they are considered to be in one of the three (3) categories that is deemed a US person for US tax purposes. As a US person, an individual is required to report their worldwide income to the US government each year — as well as disclose their foreign accounts, assets and investments. The failure to be in US tax and offshore reporting compliance may result in significant fines and offshore penalties — although the US government has developed the various international tax amnesty programs to assist taxpayers with safely getting into compliance.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
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