Obligations of US citizens

The legal obligations of US citizens are more stringent and numerous than the obligations of citizens of any other country.

Dateline: Tbilisi, Georgia

Much of what we do here at Nomad Capitalist focuses on what a second passport or residence can do for you.

What freedoms will that new citizenship give you?

Will your new residence permit give you more travel options?

Which second passport will act as the best insurance policy if things go south in your home country?

As I once discussed with the BBC, citizenship is now a commodity. As you build your passport portfolio, you can use flag theory and second passports to spread your risk across different countries to protect yourself and activate a liberating international lifestyle.

But if we only viewed second passports as commodities, we would be missing out on the bigger picture. One of the most important elements of creating a Nomad strategy is finding the places where you truly feel at home.

The fact is that many folks no longer feel at home in their home country. I know that is how I felt living in the United States. The good news is that we can all go where we’re treated best and find the places where we are welcomed and at home.

And, when we do find those places where we feel we truly belong, our citizenship can become more meaningful, influencing us to give back and contribute to the community that is our new place of citizenship.

After all, every citizenship brings with it both rights and responsibilities.

The traditional concept of citizenship is imbued with these responsibilities, focusing not only on the rights that you have claim to as a citizen but on how you can contribute back to the community and nation in which you live.

It is a symbiotic relationship, one that scholars and philosophers have been discussing for thousands of years. Societies thrive on the give and take of this relationship.

Some, however, take the relationship to the extreme.

The United States is one place where the conversation about rights is so intense that it has produced generations of entitled citizens. And yet, the US government also imposes more “responsibilities” upon its people than any other country on earth.

You won’t find many of these legal obligations listed on the USCIS website. Their focus is on the more palatable citizenship rights and responsibilities like the right to express yourself and the responsibility to participate in the democratic process.

But the obligations of being a US citizen include numerous restrictions, regulations, sanctions, and demands that other countries simply do not hold over their citizens’ heads.

These legal obligations come as part of the package deal of US citizenship, but they aren’t widely known (or paraded about on the USCIS website). They are more like the terms and conditions written in fine print that you blindly accept when installing new software on your computer.

You would never read them, but you are bound to them.

I used to live in the United States and, while I didn’t always like the rules, I resigned myself to the fact that maintaining my US citizenship meant following those rules to the letter. Everything we do here at Nomad Capitalist is about transparency and following the law 100% of the time.

But going where you’re treated best also means that if you don’t like the conditions, you can leave. And, since US citizens are subject to these obligations no matter where they are in the world, I ultimately voted with my feet and decided to renounce my US citizenship.

I am happy to fulfill my responsibilities as a citizen, but I also know that I have options and can choose my citizenship and its accompanying rights and responsibilities.

The bottom line is that you have to be aware of the fine print, especially as a US citizen. The laws that you must follow – the real obligations of US citizens – are not just about where you live but about the citizenship that follows you no matter where you go.

So, here are the real obligations of an American citizen, the rules you didn’t know you were signing up for the day you were born or the day you took the oath of US citizenship:

Tax Obligations of US Citizens

US citizens are the only ones who have to file and pay taxes no matter where they live

1. Report and Pay Taxes on Your Entire Worldwide Income

The US is one of only two countries in the world to apply citizenship-based taxation. That means that you must file and pay taxes on everything you earn no matter where you earn it or where you live.

The US does offer the Foreign Earned Income Exclusion that some people can take advantage of, but not everyone can use it and it only excludes a certain amount of income from taxation.

So, as a US citizen, no matter where you live in the world, you have to pay income tax. Whether you have a job, a business, or you’re self-employed, you’re going to be limited to making about $100,000 a year tax-free.

And if you’re a trader or have passive income of some type, then you’re not going to have any tax relief at all.

You can learn more about the Foreign Earned Income Exclusion here.

2. Report All Foreign Accounts

As a US citizen, you must report all foreign bank accounts and other foreign financial accounts, as well as corporations, foundations, and trusts.

The IRS uses a law called FATCA to basically force every banker in the world to act as an unpaid tattletale to the IRS. If your combined holdings in foreign bank accounts – both personal and financial – exceed $10,000, you will need to file Form FBAR to report those accounts to the IRS.

You can learn more about the FBAR here.

There are a couple of non-reportable assets that you can hold offshore as a US citizen without the obligation of informing the US government: gold and real estate investments (as long as you don’t rent the property).

3. No Business with Countries and People on the OFAC List

US Citizens are forbidden from doing business with countries and individuals on the OFAC list. The Office of Foreign Asset Control (OFAC) is responsible for banning any business interaction between US citizens and governments or individuals from Iran, North Korea, Sudan, Syria, and Cuba.

Anything in those countries is off-limits.

For example, I spend a lot of time in the country of Georgia. When I was a US citizen, people I worked with in Georgia often invited me to participate in deals with Iranians because Georgia is not that far from Iran and Iranians are just normal people there.

Whenever a deal like this came up, I would have to say, “Nope! Can’t. I don’t want to go anywhere near it because US citizens can’t do business with Iranians.”

There is also a list of specific individuals from various different countries on the OFAC list. For example, there are numerous Russians involved in activities that the US does not like who are on the list. You can’t take their money or interact with them in any way.

There are also people on the list from places like Belarus and Myanmar and even different companies that US citizens are forbidden from doing business with.

You may never come in contact with any of these individuals sitting at home doing business in the US, but the more you globalize your life and your business, the more you will realize that Iranians are just regular individuals living in another part of the world, and you can lose out on deals with these folks because of this rule.

Even non-US companies can lose out, as we recently saw with the ZTE debacle. ZTE dealt with Iran and other sanctioned countries, and the US government cut them out of the market.

Bribery Laws for US Citizens

US citizens and companies are required to play by US rules, not local ones. That includes a ban on bribery.

4. No Bribing of Foreign Officials

Under the Foreign Corrupt Practices Act (FCPA), US citizens are forbidden from bribing foreign officials. This rule may seem like a no-brainer… until you realize what counts as bribing.

I have friends who do business in frontier and emerging market economies where “bribery” is the only way to get things done. It is a standard business practice.

Because of FCPA limitations, US citizens and companies are at a disadvantage.

Just look at the Wallstreet Journal and you’ll quickly find reports of one company or another being investigated for FCPA violations. If they are found in violation, they may have to pay hundreds of millions of dollars.

This is American imperialism at its worst saying, “You have to live up to our standards – the US government standards – even when you’re doing business overseas.”

In many cases, these morals are applied out of context and without regard to local business culture.

5. Prosecution for Crimes Committed Overseas

US citizens are subject to US law regardless of their location. This means that if you go overseas and smoke pot, this is technically a crime that you could be prosecuted for in the United States.

There are several issues like extradition laws and questions of political sovereignty that often keep US citizens from prosecution of lesser crimes, but there are certain crimes that the US government enforces without question.

One area where they have rightfully taken action is child sex trafficking. That’s pretty disgusting stuff and I don’t see this rule as a terrible burden or obligation. It’s repulsive.

However, the rule applies to (and has been enforced for) more than child sex trafficking, so it is another legal obligation of which you should be aware. You are responsible to the US government for your actions overseas.

6. Register for Selective Service

The responsibility to register for Selective Service and potentially serve in the military still exists in the United States. There is no military draft, but according to the USCIS, it is your responsibility as an American to bear arms and defend the country from all enemies, foreign and domestic.

So, even if you leave the country, they can still make the argument to bring you back. They will even tell you that when you renounce your citizenship. In theory, any unserved military obligations could stick with you as a former US citizen.

Civic Responsibilities of US Citizens

While US citizens are not required by law to vote, they are subject to many other “hard” and “soft” rules.

7. Jury Duty and Civic Duties

The jury pool is taken from electoral rolls and DMV records of licensed drivers. If you are still a registered voter or have maintained your US driver’s license, you are technically still on the list and could be called to jury duty.

If you do receive notice and simply don’t show, charges could be brought against you. However, I was once called for jury duty while overseas and a simple indication that I was not in the US resulted in my being excused from this responsibility.

When it comes to civic duties, these aren’t really obligations of US citizens in terms of the law. They are the softer requirements that the USCIS actually lists on their website.

While you’re not required to stay informed of the issues affecting your community and you’re not required to vote (unlike in Australia), these are things that the USCIS tells you are your obligations.

Their website specifically states that you must defend the country if the need should arise, participate in your local community, and respect the rights, beliefs, and opinions of others.

These aren’t bad things to do and no one is forcing you to fulfill those responsibilities, but the government isn’t going to like you so much if you’re out saying, “Don’t respect people!” and they may come after you.

Historically, people have been targeted for going against the grain. And, as the culture in the United States becomes more divided and the government turns more and more into a nanny state, the less you get along with people the harder it could be for you to stick around.

The Only Way Out

As we frequently discuss in our articles about US taxation, the only way out of these obligations is through renouncing your US citizenship. I debated for a long time whether or not the rights of US citizenship ultimately outweighed these responsibilities but, in the end, I chose to leave.

You may not be familiar with what it means to renounce US citizenship and it certainly isn’t the answer for everyone. However, if these obligations create too many problems for you and you have decided that you no longer want any part of the US system, you can learn more about renouncing your US citizenship here.

Andrew Henderson

Andrew Henderson

Andrew has been internationalizing since 2008, and has learned what works and what doesn't work when it comes to reducing taxes, increasing personal freedom, and creating wealth. Click here to work with him personally.
Andrew Henderson
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