The U.S. tax code is a very complex thing, with all sorts of different rules regarding what specific things create a tax liability for an individual. Thus, it is possible for a person to owe taxes for something and not realize it. This can lead to a person facing a very unpleasant surprise down the road. Having failed to pay taxes due to lack of knowing they were owed can lead to a person facing a substantial tax debt and aggressive efforts by the IRS to collect that debt.
One group of individuals that sometimes ends up in this situation of having a "surprise" tax debt are individuals who automatically acquired U.S. citizenship when they were born (through things such as the citizenship of their parents or being born in the U.S.), but have not lived in or had major ties with the U.S. since they were very young. These individuals might not really think of themselves as Americans. However, the Internal Revenue Service does. As we've mentioned before, under U.S. law, American citizens have an obligation to pay U.S. taxes even if they don't reside in the United States. If individuals in the above-mentioned situation don't realize they have this obligation, they could end up with a rather significant tax bill building up.
Recently, in the news, a story has surfaced of an Israeli citizen who recently discovered that he is facing such a bill. In addition to being an Israeli citizen, the man is also an American citizen, due to having been born in America. He hasn't lived in America since he was seven.
He recently found out that he might have a tax debt of around $6,000 with the U.S. government due to his U.S. citizenship.
He is attempting to resolve this tax matter, but has run across some difficulties and complications in these efforts. He purportedly plans to renounce his American citizenship once the matter is resolved.
As this matter illustrates, individuals who have ended up with a "surprise" tax debt due to being unaware of a tax obligation can find themselves in a very difficult and complicated legal situation. Experienced tax attorneys can walk individuals in such situations through what options they may have and help them try to find a workable resolution to their situation.
Source: CNN Money, "Meet the 'accidental American' with a big tax bill," Sophia Yan, Dec. 17, 2014