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1Tax Mistake Visa Residents Don't Want To Make

1Tax Mistake Visa Residents Don't Want To Make

Accidental American Status Can Lead to Huge Tax Liabilities

While many people who come to the United States hope to become a citizen or permanent resident at some point, they must also remember the tax obligations that come with this status. If someone is uncertain about their specific legal status and how it impacts their tax obligations, it is important to speak with both an immigration and tax attorney. They can talk you through the impact of going from a student or work visa to permanent residency to eventual citizenship and how it impacts the taxes you must pay.

Being proactive about this can ensure that no one finds themselves in a situation where they owe back taxes to the IRS. But readers may wonder how it is possible for someone to accidentally become a permanent resident or United States citizen. The truth is that there are some ways for this to happen.

One prime example is the birthright citizenship clause that exists in the United States. Individuals who are born in the United States are automatically citizens, even if they do not live the majority of their lives in the United States. In this case, someone may have been born in America, but lived the vast majority of their years in another country. When they eventually want to come back to the United States for college or a job, they may not even realize they are a citizen.

There are also cases where American citizens move to other countries because of a job they are offered. For example, there was the famous case of two citizens who moved to Canada because one of them was offered a prestigious job at a Canadian law firm. The two always said they would remain United States citizens, even if they lived in Canada for many years, but the wife needed to be a Canadian citizen so she could pass the bar exam in Ontario.

They eventually became dual citizens, while their daughter also had joint American and Canadian passports. Many decades later, they wrote about how the United States government was incredibly unhelpful in handling their tax obligations. The IRS has many FBAR and FATCA obligations that require citizens to disclose and pay tax on their foreign holdings. They also have a very high tax on American citizens holding their money in Canadian mutual funds.

Eventually, it got to a point where the couple considered willingly giving up their United States citizenship so they did not have to deal with the IRS anymore.