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3 ways you could be a US citizen and not know it

Recently, I attended an intriguing conference on international tax. It included a discussion on immigration and how it relates to tax planning. During this discussion, I learned a new term: Accidental US citizen. Immigration attorneys believe there could be upwards of 100,000 people who are US citizens and don’t know it. How could this happen? Surprisingly, it’s not difficult.

These “surprise” citizenships can cause significant tax headaches. Since the US is one of only 2 countries that taxes citizens, regardless of residency, on world-wide income, being a US citizen and not knowing it can cause a world of problems.

It is well known that being born in the US is the most common way of becoming a US citizen. Other common ways include marrying a US citizen or electing to naturalize. However, there are ways you could be a US citizen and not know it.

1. Your parent is a US citizen, becomes a citizen of another country, but did not lose US citizenship.

Prior to 1990, US immigration law was such that if a person became a citizen of another country, they were presumed to no longer want to be a US citizen. In fact, many people were told by US consulate officers that they indeed were no longer US citizens. Some of these people received Certificates of Loss of Nationality (“Certificates”); however, many did not. In 1990, the law changed thanks to the IRS’s stance that those individuals who did not obtain Certificates were still US citizens.

In 1990, the US adopted a retroactive presumption of intent to retain citizenship after acquiring foreign nationality. This resulted in tens of thousands of people who thought they were not US citizens still being considered by the US government to be US citizens. Without a Certificate, your parent is still a US citizen. Therefore, you may be a US citizen depending on whether your parent met certain US residency requirements.

2. You were born in the US to foreign diplomats.

Many children of diplomats who were based in the US at the time of their birth make the case that they are not US citizens even though they were born in the US. They argue that US law exempts them from US citizenship because their parents were diplomats. However, one crucial criteria must be fulfilled to qualify for this exemption. The parents must have full diplomatic immunity from arrest. Think of Ambassadors, Embassy support staff, Consular officers, etc… This does not include diplomats or employees who only have “consular” immunity or “official acts” immunity.

3. You are a US Permanent Resident, living in the US, and one of your parents naturalizes.

Although you did not apply for naturalization, if one of your parents becomes a naturalized citizen before your 18th birthday, you are now a US citizen.

Do you need to have a chat with your mom or dad? Being a US citizen has its privileges. It also has its cumbersome tax responsibilities.