7 Harsh Legal Obligations of US Citizens

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?

Navigating the world of citizenship and obtaining a second passport has become increasingly difficult, and in recent years, we have seen significant changes. Golden Visa and Citizenship by investment programs are becoming more problematic, raising rates and increasing the required ‘donation’ in many jurisdictions. Don’t put it off any longer; apply to become a Nomad Capitalist client, and we will help you legally go where you are treated best.

Obligations of Citizenship 

As our founder, Andrew Henderson, 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.

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 you claim 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 United States Citizens and Immigration Services 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. 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.

Everything we do here at Nomad Capitalist is about transparency and following the law 100% of the time. 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, Mr. Henderson ultimately voted with his feet and decided to renounce his US citizenship.

You have options, and you can choose your 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:

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 some passive income, then you won’t have any tax relief at all.

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 adviser to the IRS. If your combined holdings in foreign bank accounts – personal and financial – exceed $10,000, you must file Form FBAR (Report of Foreign Bank and Financial Accounts) FBAR to report those accounts to the IRS.

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.

No Business With OFAC Countries/Citizens

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, Russia, Syria, and Cuba.

Anything in those countries is off-limits. For example, if you do business in a country like Georgia, that is not that far from Iran. You could be invited to participate in deals with Iranians. But, because of OFAC, US citizens can’t do business with Iranians. There is also a list of specific individuals from various different countries on the OFAC list.

There are also people on the list from places like Myanmar and even 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 because of this rule. Even non-US companies can lose out, as we saw with the ZTE debacle. ZTE dealt with Iran and other sanctioned countries, and the US government cut them out of the market.

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.

Those who do business in frontier and emerging market economies understand that “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 Wall Street Journal, and you’ll quickly find reports of one company or another being investigated for FCPA violations. They may have to pay hundreds of millions of dollars if found in violation. This is American imperialism at its worst, saying, “You have to live up to the US government standards even when you’re doing business overseas.”

These morals are often applied out of context and without regard to local business culture.

Prosecution for Crimes Committed Overseas

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

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

Of course, there are certain crimes where this law serves a necessary and important purpose, such as trafficking. 

So, it is another legal obligation of which you should be aware. You are responsible to the US government for your actions overseas.

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.

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 receive a notice and don’t show, charges could be brought against you.

However, if you are called for jury duty while overseas, and a simple indication that you are not in the US, you will likely be 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, these are things that they say 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.

Historically, people have been targeted for going against the grain. And, as the culture in the United States becomes more divided by culture wars, the less you get along with people, the harder it could be for you to stick around.

Escape The Obligations of US Citizens

As we frequently discuss in our articles about US taxation, the only way out of these obligations is through renouncing your US citizenship. 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, contact the Nomad Capitalist team to learn more about renouncing your US citizenship.