Renouncing US citizenship: the path for accidental Americans

Many Europeans have no idea at first that they are also US citizens. They were born in the USA, became citizens through their parents, or ended up with an American passport through other circumstances (such as being born on a US base) without ever wanting one. They are known as "accidental Americans".

What sounds harmless can have far-reaching consequences: the US government taxes its citizens on their entire worldwide income, wherever they live. So even if you live in Europe, build your wealth there and never set foot in the USA again, you still owe the American tax authority (the IRS).

In this article we explain how to renounce US citizenship correctly, both formally and for tax purposes, what the risks are (especially the exit tax) and which options exist specifically for accidental Americans.

1America's worldwide tax reach: a global exception

The United States and Eritrea are the only countries in the world that practice citizenship-based taxation. That means every US citizen must file an annual tax return with the Internal Revenue Service (IRS), even if they live permanently outside the USA and are already fully taxed there.

Besides the income tax return, you also have to report various assets and accounts, including:

• FBAR (FinCEN Form 114): reporting of all foreign bank accounts above $10,000

• FATCA (Form 8938): reporting of foreign financial assets above certain thresholds

• Forms 3520 and 5471: reporting for certain company and trust structures

These reporting rules are complex, easy to get wrong and backed by stiff penalties. Many accidental Americans know nothing about any of this until their bank, because of FATCA, pushes them to disclose or closes their account.

2Renouncing US citizenship: why and when?

The decision to give up US citizenship (expatriation) is usually pragmatic, not political. It gives you:

• Tax relief: no more IRS obligations

• Banking without the FATCA stigma: no more trouble opening accounts in Europe

• Clear life planning: one country, one tax system

For people with high incomes or significant wealth in particular, keeping US citizenship is a growing risk. Even if you have always followed the rules, you live with constant uncertainty: what regulations come next? What penalties await a paperwork mistake?

3The legal steps: how do you renounce US citizenship?

Renouncing US citizenship is a formal administrative act carried out at your nearest US consulate or embassy. The key steps:

1. Book an appointment at the US consulate or embassy (e.g. Oslo, Stockholm or London)

2. Complete the forms:

   • DS-4079 (Expatriation Questionnaire)

   • DS-4080 (Oath of Renunciation)

   • DS-4081 (Statement of Understanding)

3. Pay the administrative fee: $450 (since April 13, 2026)

4. Appear in person at the consulate

5. Receive your Certificate of Loss of Nationality (CLN): the proof that you are no longer a US citizen

But be careful: renouncing at the consulate is not the last step, it is the first. You are only "released" for tax purposes once the tax side is settled too. So if you want to give up US citizenship, the costs include not just the $450 consular fee but possibly the exit tax as well, if you count as a "covered expatriate".

4Leaving the tax system: how the exit tax works

Under §877A IRC, US tax law imposes an exit tax on certain people who renounce their US citizenship. The goal is to make sure the USA can still tax unrealized gains (e.g. stock gains, company shares).

4.1When does the exit tax apply?

You count as a "covered expatriate" if any of the following applies:

• Net worth > $2 million (worldwide, including real estate, holdings, etc.)

• Average US tax liability over the last five years > $211,000 (for expatriation in 2026, adjusted annually for inflation)

• You have not properly filed your last five US tax returns

If any of these applies, you are taxed on a deemed sale of all your assets on the day before expatriation, even if you sold nothing at all. The exemption is $910,000 (for expatriation in 2026). Any gain above that is taxable.

5A special case: accidental Americans and the Streamlined Program

The good news: for many accidental Americans there is a way to renounce cleanly, without the exit tax.

The condition: you must not count as a "covered expatriate". Above all, that means you have filed correct tax returns for the past five years with the IRS.

If that hasn't happened yet (which in practice is almost always the case), you may, under certain conditions, be able to use the:

5.1Streamlined Foreign Offshore Procedure

This IRS program lets you get your tax affairs in order retroactively, without penalties and with less paperwork. Requirements:

• No residence in the USA

• No willful intent or fraud

• Filing three US tax returns and six FBARs

Once this step is done, you are "compliant" and can then renounce free of penalties and tax, provided your net worth is below $2 million.

6What happens after you renounce?

Once your renunciation is complete, you receive the CLN (Certificate of Loss of Nationality). From then on you are formally no longer a US citizen.

Important: you still have tax obligations for the year of expatriation. You must:

• File Form 8854 (Expatriation Statement)

• File a final tax return (Form 1040 or 1040-NR) for the year you exit

Only then are you fully "released" for tax purposes.

7What you lose: what you give up with US citizenship

Many accidental Americans have no emotional ties to the USA. Even so, you should be aware of the consequences:

• You lose the right to live and work in the US without a visa

• You can no longer pass US citizenship on to your children

• Future trips to the US require an ESTA or a visa

For most people, that is easy to live with: if you have never lived there, you have no plans to build a future there either. Still, you should be aware of these points.

8Our recommendation: the best way to go about it

If this affects you and you live in Europe, we recommend the following approach:

1. Take stock: Do you actually hold valid US citizenship?

2. Establish your tax status: covered or non-covered expatriate?

3. Get advice from US tax experts: use the Streamlined program or go for full compliance?

4. Book your consulate appointment and submit all documents

5. Follow-up: tax return for the year of expatriation and Form 8854

9How we support you

For years, Mount Bonnell Advisors has specialized in advising European clients with ties to the US. Working with US tax advisors and consular law specialists, we support you at every step:

• Review of your citizenship

• Preparation of the required tax documents

• Handling the Streamlined procedure

• Advice on the exit tax

• Preparation for your consulate appointment

• Follow-up and final tax return

Get in touch for a discreet, expert initial tax consultation on expatriation.

Mount Bonnell Advisors: your reliable partner for renouncing US citizenship. You will find more articles on US tax and citizenship under News.

In short

• The US taxes its citizens based on citizenship, even if they live permanently in Europe.
• Renouncing citizenship is a formal act at a US consulate using Forms DS-4079, DS-4080 and DS-4081, and it ends with the Certificate of Loss of Nationality.
• As a covered expatriate, you are subject to the exit tax under §877A IRC, for example if your net worth exceeds $2 million or if your tax returns for the last five years were not properly filed.
• If you have never filed, you may be able to catch up on your obligations through the Streamlined Foreign Offshore Procedure.
• For the year you renounce, you still need to file a final tax return and Form 8854.

How we help you

• US taxes for US citizens abroadForm 1040, FBAR and Streamlined for US citizens living in Europe.
• Streamlined FilingCatch up on missed US tax returns and FBARs through the Streamlined procedure.
• US Tax ConsultationYour US tax question, answered by people who know both sides.