The Accidental American: Compliance and the Path to Renunciation

The issue

Someone born during a European family’s brief stay in the United States, or born in Europe to an American parent, may be a US citizen without ever having used the status, and US citizens are taxed on worldwide income. Banks in Germany, France, the United Kingdom, Italy and Switzerland screen customers for US indicia under FATCA and ask for a taxpayer identification number or a Certificate of Loss of Nationality. The client then needs to know whether the citizenship is real, what the unfiled years have cost, and whether it can be ended without covered expatriate consequences.

Who the guide is for

The guide is written for advisors in Europe and the United States whose client has learned of a US citizenship, and who must compare compliance with continued citizenship against compliance followed by renunciation. Its treaty analysis covers Germany, France, Switzerland, the United Kingdom and Italy.

Measuring the exposure first

Three inventories precede any filing: whether citizenship exists or was already lost by an earlier act; a financial inventory that yields the two decisive figures, net worth and the aggregate US tax for six years; and the facts bearing on non-willfulness. The guide identifies what raises the tax figure, chiefly the tax on non-US funds and the 3.8 percent net investment income tax, which, under the Federal Circuit’s decisions of August 31, 2026 on the French and Canadian treaties, no foreign tax credit offsets.

The relief procedures and their opposite sequences

Under the Streamlined Foreign Offshore Procedures, a non-willful taxpayer abroad files returns for three years and FBARs for six, certifies non-willfulness on Form 14653, and pays tax and interest without penalties. Each return needs a Social Security number, and obtaining one from abroad usually sets the timetable. The Relief Procedures for Certain Former Citizens require renunciation first and cumulative conditions, including net worth below USD 2,000,000 and six-year aggregate tax of USD 25,000 or less; within them nothing is collected, no Social Security number is needed and covered expatriate status does not arise. A client who renounces and then misses a threshold cannot undo the oath.

Renunciation and the covered expatriate screen

The consular process involves two interviews, one or both in person, and an oath sworn in person on the consolidated Form DS-4079. Once the Department of State approves the Certificate of Loss of Nationality, the loss is effective on the date of the oath and is irrevocable, but the exit year is still reported on a dual-status return with Form 8854. A covered expatriate is one with net worth of USD 2,000,000 or more, average annual income tax above USD 211,000 for 2026, or no certification of five compliant years. A person who was a dual citizen at birth, is still a citizen and tax resident of that other country and was a US resident for no more than ten of the last fifteen years is exempt from the net worth and tax tests, though not from certification.

The treaties before and after the loss

As long as the citizenship lasts, the saving clause of each of the five income tax treaties keeps US taxation in place, while the relief articles that re-source income for credit purposes continue to apply. Once citizenship ends, the person can claim the treaty as a resident of the European country, and the guide explains why the ten-year former-citizen clauses, written for the regime replaced in 2008, are treated as dormant. Under the estate tax treaties with Germany, France and the United Kingdom, a former citizen domiciled there then faces US estate tax only on US real property and business property, with partnership interests added for Germany and tangible movables for France.

The questions the guide answers

• Is the client a US citizen at all, or was the citizenship lost by an earlier act?
• Where does the exposure lie: in tax, in information return penalties or in the rules on foreign funds?
• Which relief procedure applies, and in what order are compliance and renunciation completed?
• What does renunciation before a consular officer involve, and when is it effective for tax purposes?
• Is the client a covered expatriate, and does the exception for dual citizens from birth apply?
• How do the five European treaties apply before and after the loss of citizenship?
• When is keeping the citizenship the better choice?

The firm advises accidental Americans on the US side: the citizenship and financial inventories, the choice and preparation of the compliance procedure, the covered expatriate screen and Form 8854, and the treaty position before and after renunciation. European consequences are coordinated with the client’s advisors in the country of residence, and French law questions with French advisors from the firm’s network.