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Renouncing US citizenship(8 Posts)
Prompted by another new thread about British citizenship I thought I'd pose the question about US citizenship. DD was born in the states and the other day while revamping her room (she is a Masters student in London now) I came across her Social Security card, issued when she was a toddler. We moved back to the UK when she was 3.
I'm told the ITS can be pretty tricky about demanding tax if their citizens even if it's earned abroad by people living abroad. So I'm now keen she should extricate herself.
Clearly tax hasn't been an issue while she's been a student t with vacation jobs. But it may soon be.
Does anyone have any experience or thoughts?
This link tells you what she needs to do if she wants to renounce her US citizenship - travel.state.gov/content/travel/en/legal/travel-legal-considerations/us-citizenship/Renunciation-US-Nationality-Abroad.html
Thanks. Yes. I did read that. I guess I'm weighing up pros and cons at the moment. I kind of feel responsible since she didn't ask to be born there! People say ah but she'll be able to work there. I argue that DH got a job there - in other words if a company wants you they'll have you, regardless of passport. But am I missing anything? Any advantages to hanging on to it? And are the tax obligations horribly arduous?
The weird thing is that she has come and gone through US immigration several times on her British passport which clearly states where she was born and nothing has ever flagged up. So I'm wondering is the IRS likely to ever even cotton on?
I'm a dual citizen. I've lived in both the US and the UK. There is a tax treaty between the US and the UK so you don't really get double taxed but you are supposed to file every year and if there is a difference in the US's favour (never happened to us or any of my friends but I understand it can happen) she'd be legally obliged to pay them that. In practice most people don't seem to and only figure out what to do about it all if they ever decide to move to the US. Also, technically, if she ever travels to the US, even to visit, she is obliged to travel in on a US passport. It's unlawful to use a passport from another country if you're a US citizen. Again, if she doesn't have one and she enters as a UK citizen I'm not sure how they'd even realise, but it's a technical obligation she retains as a citizen.
Having US citizenship could be very useful if the line of work she goes into has opportunities in the US. She'll be eligible to work or visit as she pleases and to US consular assistance in any other country she's in, should she need it. With the current situation with the UK and EU, it's possible US citizenship will give her more opportunities in Europe too (though who knows what will actually happen there). And in other countries. The US has been losing International clout over the last few decades, but it still holds some doors open that the UK doesn't, so dual citizenship gives her more options.
Also, any children she has would, at the moment, be US citizens through her as well.
There may other more obscure issues, but I haven't heard of any.
This is really a decision for your daughter, not you. Stop worrying about it - you've given her possibilities, not a weight. Point her at the information and let her know you'll help her if she needs some support.
I'd recommend the Facebook group American Expatriates, there are a lot of 'Accidental Americans' (either born there and left as small children or were given citizenship through their parents) there who can talk you through the pros and cons of keeping US citizenship and steps if your daughter chooses to renounce. Their main advice is likely to be for her to avoid entering the US tax system and getting professional advice for things like investment if she chooses to remain a US citizen.
The IRS has had a decreasing budget to tracking down Americans abroad. I've read something like the compliance rate for us is something like 2%. They, and the rest of the US government, don't really keep track unless information is provided to them (and even then only in a very specific way).
The main issue is more banking, financial products, and employment because of the fear of the growing and ever changing US requirements put on businesses who deal with us (including our own). Due to the US throwing its weight around and so many countries rolling over, it's used extraterritorial powers to threaten banks if they don't pass on US citizen details. That's why they now ask if you're a "US person" on forms. Some banks have stopped wanting to deal with us, we're denied certain products, most investment companies don't want to touch us (even US companies, such as Vanguard and Wealthsimple won't touch Americans abroad), some pension companies don't want to know either, and it can be issue in a job that involving accounts. That's before getting into the recent weight GILTI has put on for self-employment or - while I haven't heard it happening in the UK, in several European and other countries, US citizens are having their accounts closed and insurance policies canceled as banks are terrified of having to deal with US reporting requirements. There are people who renounced just to keep the roof over their head or their business running. I haven't yet, not sure if I will, but it's just as much if not for some people more a risk than it is a benefit or a possibility. As I said, I'd recommend getting more in-depth advice from a group dedicated to helping people in this situation as they can dig more into those. *Also, any children she has would, at the moment, be US citizens through her as well.*[[https://travel.state.gov/content/travel/en/legal/travel-legal-considerations/us-citizenship/Acquisition-US-Citizenship-Child-Born-Abroad.html#:~:text=For%20birth%20between%20December%2024,acquire%20U.S.%20citizenship%20at%20birth. Not true "For birth on or after November 14, 1986, the U.S. citizen parent must have been physically present in the United States or one of its outlying possessions for five years prior to the person’s birth, at least two of which were after the age of 14." It's quite possible, as in my case where I left at 17, to only be able to pass on citizenship to some of one's kids and a lot of US citizens abroad like me are choosing not to. Once a child hits 18, it's pretty difficult for them (the child or the IRS) to try to make a claim as they have to prove both of those points.
Sorry, I mangled that:
Wealth Simple's FAQ on US citizens abroad
For Also, any children she has would, at the moment, be US citizens through her as well.
Acquisition of U.S. Citizenship at Birth by a Child Born Abroad rules
DH gave his up after a long protracted process where he had to back file 5 years of IRS returns. Yes there are tax treaties, so it wasn't so much that he owed so much tax, but it is a very complicated filing system (and he had to file personal taxes and for two small businesses we run). The specialist accountancy fees were eye watering.
I believe you are supposed to file even on no or very little income, and it might be an idea to do so, as keeping up to date is easier than catching up at a later date. DH also then had to pay some kind of exit tax and large fee to renounce. The reasons he was driven to do it were that firstly he needed a new bank account, also in his line of work it would have been a very bad look of it ever came out he wasn't compliant and finally I believe capital gains are exempt for the treaty (I don't know the full in and out) and we want to sell our house in the near future - without giving a large chunk of the proceeds to a country he left when he was 3.
The Trump factor was another reason why he felt he didn't want to be tied to the US - though that issue is abating somewhat. We are never going to want to live there though.
Yes, she should be filing an annual tax return and declaration of bank accounts (FBAR). You can get specialist accountants to help you but they are expensive - I do mine myself. As others have said, it’s unusual to have to pay top up US taxes, but it does happen (e.g. on uk ISAs which are uk tax exempt only).
If she renounces, she will need to file back tax returns anyway, plus it is harder to get into the US even to go on holiday as ex US citizens don’t qualify for an ESTA visa waiver, and most visas require an embassy appointment.
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