The first rule about 1722 club is that there is no 1722 – image courtesy Fight Club
If you’re looking to become a US citizen and you don’t know why the Department of Homeland Security has asked for an IRS form 1722 for naturalization, then look no further. And don’t look for the elusive and quite frankly non-existent 1722.
What the US government want to ascertain is that you’ll make a good citizen. One of the obligations of the good citizen is to pay their taxes every year. It’s part of the citizenship examination – after all the happy federal government is a funded one.
So they ask you for a form that doesn’t exist to prove that you’ve been paying what you owe. Even though, as all regulated financial advisers are required to tell you, past performance is no indication of future performance. Still, you can’t not pay your taxes and expect to be welcomed with open arms into the bosom of citizenship. And they do hope that you’ll continue to pay taxes when you naturalize.
This is a big one. If you’re been a resident alien and earned money in the United States of America, then you will have to pay the appropriate taxes on it and also file the appropriate tax documentation on time. Then of course, you have to prove it, you can’t just go to the interview and say that you’ve done it.
So how do you prove that you’ve been a model alien and paid your dues? Well the easiest way is to get your tax transcripts. These itemize the payments, deductions and tax liabilities each year and you can easily go onto the IRS website and ask for them.
They come in two flavors – the long version and the summary version. My preference is to provide the full version when asked for the IRS form 1722 for naturalization. More paper is perhaps bad for the environment, but it is good for building a fat file of data which shows that you can toe the line.
FATCA is Foreign Account Tax Compliance Act, which is the US Government’s mandate that US people and organizations have to tell the IRS about their foreign assets. It’s enacted in collusion with foreign banks and trusts, so it means you can’t shelter funds from taxation simply by carrying gold bullion to a Swiss bank. The Swiss are obliged to tell the US Government which is kind of crazy if you think about it.
What happens if the US is at war with a nation and you have a store of wealth there? FATCA requires you to tell the US about your funds, though it seems unlikely that the beleaguered nation would offer up the data gladly to corroborate or deny your claims.
Why don’t some US people like FATCA?
US people, regardless of where they live and earn their money have to pay US taxes on their income. So someone who was born in the US and then moves to China when she is four years old still pays US taxes. While residents of the US probably enjoy the stream of taxation income coming in from overseas, people who don’t enjoy the benefits of residency probably don’t. After all, if I’m a US citizen living in Russia, then would I really want to pay taxes to pay for the American War Machine? Probably not.
You get a deduction on your US income taxes based on taxes you have paid for the locality in which you reside. Which is all well and good except when the tax codes of the US and your country of residence don’t line up. For example if you sell a home in the UK, your capital gains allowance would be different there than in the US, and you might have to pay capital gains tax in the US.
Regardless, the US imposes stiff penalties if you don’t file your FBAR on time (seriously, I couldn’t make up a form that sounds more like Fubar if I tried), and there are international agreements for foreign organizations to hand over financial records of US citizens. If your foreign assets add up to over $50,000 (subject to status) then you also have to file a Form 8938.
Unfortunately the IRS and the USCIS don’t talk to each other very often, so you will get asked to provide IRS 1722 Letters for your naturalization interview. These are letters that don’t exist. Check out our IRS Form 1722 page to read where to get something to take to the interview.