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IRS taxing “accidental” Americans (on purpose)

By Kathryn Zdan, EA

Editorial Director

The United States is one of only two tax jurisdictions that tax individuals based on citizenship or residency (the other is Eritrea). The definition of “citizen” for U.S. tax purposes is fairly expansive, and it’s possible to owe U.S. tax even if you have never lived in this country. Meet the “accidental American.”

Former British Prime Minister Boris Johnson came down with a case of accidental Americanness — he was born in Manhattan and was thus a U.S. citizen even though he left America when he was age 5. Upon the 2014 sale of his London home, which did not generate tax in the UK, due to his American citizenship he owed around $165,000 to the IRS.1 He initially stated he would not pay the bill because it was “absolutely outrageous.” It is assumed that he eventually paid the tax because he renounced his U.S. citizenship in 2016.

Time to jump ’ship

Lest you think it’s easy to undo this mess, that citizen-ship has sailed. To exit the U.S. tax system, you will need to prove five years of tax compliance and you may have to pay an exit tax (aka expatriation tax) if you meet certain income and net worth requirements.

The exit tax, if it applies, is calculated as follows: All property of a covered expatriate is treated as being sold on the day before their expatriation date for its fair market value.2 The exit tax is an income tax on the total of any unrealized gain from that deemed sale plus the deemed distribution of IRAs, §529 plans, and health savings accounts (taxed at ordinary rates). However, the exit tax applies to this amount only to the extent it exceeds an inflation-adjusted exclusion amount ($767,000 for 2022).3

The cherry on top of this fruited plain is that once you make it through the exit tax gauntlet, you also end up in the government’s slam book: Every quarter, the U.S. Treasury Department publishes a list of the names of people who renounced their U.S. citizenship:

TGIF Mozzarella sticks bag

A short primer while my primer is drying

By Diane Fuller

Contributing Editor

The other day, an article by Marlene Davis titled “Why English is so hard to learn”1 appeared in my Instagram feed. It piqued my interest, although my attention peaked after about 15 minutes of doing more research on just how confusing English must be to someone learning the language … homonyms, homophones, homographs, and heteronyms?!

A homophone is a homonym where two or more words have the same pronunciation but different meanings and spelling, for example:

  • I’m allowed to use the coffee house as my workplace, but it’s frowned upon to speak aloud.
  • I checked the site to verify the information, but the printing was too small, and my sight is so bad.
  • Who knows what the answer is, but her responses are usually on the nose.
  • Only a prophet will know if the company will surpass a 20% profit.

Homonyms can also refer to homographs, where words can have the same spelling but more than one meaning. They may or may not have the same pronunciation (but if they are pronounced differently, they are heteronyms):

  • Doing taxes taxes my brain.
  • He tried to have a frank discussion with his client while eating a juicy frank.
  • She tried to project an air of confidence even though her project was riddled with inaccuracies.
  • She moped around the house because her moped was broken.

Heteronyms are each of two or more words that are spelled alike but have different meanings and are pronounced differently. They are homographs but not homophones:

  • I am not content with the content of the Notice of Proposed Assessment.
  • My eyes tear up every time I tear open a letter from the FTB or IRS.
  • My client decided to desert his efforts to supply me with his receipts, claiming that his brain was a desert wasteland.
  • The long-term care insurance was invalid because she was already an invalid.

I can’t remember learning this in school. I’m glad English is my first language.

1 “Why English is so hard to learn by Marlene Davis” – Buckroth Enterprises…

Tax History 101

The first record of taxation comes from ancient Egypt; around 5,000 years ago the Pharoah collected a tax equal to 20% of all grain harvests. Because this was before the existence of coin currency, the tax was literally paid in grain.

The Rosetta Stone was a propaganda poster for the successes of King Ptolemy V, that also served to explain the new tax laws he decreed in 196 BCE.1

Julius Caesar implemented the first sales tax: a flat 1% across the entire Roman empire. Caesar Augustus raised it to 4%.

Caesar Augustus also changed the tax system in the late first century BCE from one that taxed regions as a whole to one that was a direct income tax on individuals.

Ancient Egypt, Persia, and China all assessed property taxes based on the production value of the land, which were paid by farmers.

For more on the history of taxes, go to

A few fun facts about this week’s writers:

Kathryn Zdan, EA

Kathryn Zdan, EA, spends her non-Spidell hours on photography and watching horror films (and then sleeping with the light on). She also enjoys hiking, biking, and watching foreign films.

Diane Fuller

Diane Fuller loves to read, cook, and go to Ketchum/Sun Valley, Idaho, as many times as possible during the year with her family including grandkids and dogs.

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