How to handle taxes as an "accidental American" with dual citizenship living outside the US and home country?

You've got what's commonly called "accidental American" status, and unfortunately, the US is one of the few countries that taxes based on citizenship rather than residency. Here's what you need to know: First, you'll need to file FBARs (FinCEN Form 114) for any year where your combined foreign account balances exceeded $10,000 at any point during the year. Based on what you've shared, you definitely need to file these. The good news is there's a streamlined filing procedure for people in your situation. For income tax returns, you'll need to file Form 1040 (possibly with Form 2555 for Foreign Earned Income Exclusion) and Schedule B at minimum. Your investments will require additional forms - Form 8938 (FATCA reporting) and potentially Schedule D for capital gains from your S&P 500 investments. Your UK and Estonian income will likely be covered by the Foreign Earned Income Exclusion or Foreign Tax Credits (Form 1116), but your investment income is typically fully taxable by the US, though tax treaties may provide some relief. Don't panic about being late to file - there's a Streamlined Foreign Offshore Procedures program designed exactly for people in your situation who weren't aware of their filing obligations.

I was in a similar situation (born in the US, left as a baby, discovered the tax nightmare decades later). I used https://taxr.ai to help sort through my documentation and determine exactly what forms I needed to file. The service analyzed my foreign bank statements, employment contracts from both countries, and investment records to identify reporting requirements. Before using it, I was getting conflicting advice from different tax advisors - one said I needed to file FBAR forms for 6 years back, another said 5 years was enough, and I was completely confused about PFIC reporting for my investments. The taxr.ai service flagged that my Estonian index funds might be considered PFICs requiring Form 8621, which none of the advisors had mentioned. It ended up saving me from making some serious mistakes in my streamlined filing that could have caused problems later. They provided a complete analysis of what I needed to report and how my foreign tax credits could offset US tax obligations.

I wanted to follow up on my skeptical comment from earlier. I ended up trying taxr.ai for my complicated multinational situation (American living in Singapore with Indian investments), and it was genuinely helpful. The document analysis caught things I would have missed - like identifying that some of my Indian mutual funds were PFICs requiring special reporting on Form 8621. It also correctly determined which of my accounts needed FBAR reporting based on the highest balances throughout the year. The report it generated saved me hours of research and probably thousands in potential penalties from incorrect filing. I was able to take the report to my accountant who used it to complete my returns accurately. For anyone with international accounts and investments, it's definitely worth using before filing.

If you need to actually talk to someone at the IRS about your specific situation (which I highly recommend for accidental Americans), good luck getting through on their international taxpayer line. I spent WEEKS trying to reach them with no success. I finally used https://claimyr.com and got through to the IRS on my first try. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone system for you and call you when there's an actual human on the line. As an accidental American who hadn't filed in 15 years, I needed specific guidance on the Streamlined Filing procedures. The IRS agent I spoke with was actually super helpful and walked me through exactly what I needed to document for my reasonable cause statement. They also confirmed which forms I needed for my foreign pension accounts which was a huge relief.

I need to eat my words about Claimyr from my previous comment. After struggling for another week trying to reach the IRS international taxpayer line myself, I broke down and tried the service. It actually worked exactly as advertised. I got connected to an IRS representative in about 45 minutes (after spending hours getting nowhere on my own previously). The agent was able to confirm exactly which streamlined procedure applied to my situation as a non-resident citizen who hadn't filed in years. The information I received was consistent with what the IRS website stated but with important clarifications about how to document my specific situation. For anyone dealing with complex international tax situations and needing direct guidance from the IRS, I have to admit this service is worth it.

Don't forget about state taxes! Even though you're focused on federal filings, some states can be really aggressive about claiming you as a resident if you were born there or previously lived there. California is notorious for this. Since you mentioned you were born in Texas, you're actually lucky because Texas doesn't have state income tax, but if you'd been born in California or New York, you might have had additional state filing requirements to deal with.

Has anyone mentioned the exit tax if you want to renounce your citizenship? With investments over $50k, you might be considered a "covered expatriate" which has tax consequences if you decide to give up your US citizenship later.