US UK dual citizen, has anyone renounced US citizenship due to ludicrous tax situation?(14 Posts)
I'm a dual citizen of UK and USA. I was born to British parents who were living in the US but returned to the UK as a baby and grew up here. I then spent 1 year at uni in the USA and then lived there for nearly 5 years as an adult with DH, and had two DC born there. We're now back in the UK with no intent to return to live in the US. Obviously as a citizen I have to continue to fill out tax returns. I was
stupidly hoping they wouldnt be too complicated and that after getting my US accountant to do it one year I could just do it subsequent years. But it seems to get more complicated each year. Not only reporting all the bank accounts but even company finances for our UK company of which I am a Co director. So far I've not had to pay US tax as it falls withing the limit for foreign earned income exclusion but I am worried that the US IRS seems to be getting more and more involved in my UK affairs (this year I even had my UK bank contact me with IRS forms) , but also if I come into a lump sum when my parents eventually die, then I'll end up paying US tax on that, or if i get sum from a house sale, not to mention the on going hassles and cost of filong returns eachieve year. I'm now wondering if I should just consider renouncing my US citizenship. Has anyone done this, and if so, what are the implocations I may not have thought of. Will I be stopping myself from ever moving back there? How long does it take before you can stop filing tax returns, or are there any other circumstances where the IRS might allow you to not fill in a return. What should I do???
Can't answer your question exactly but thought it might make you feel better to know that my US citizen husband has been here for 12 years and we haven't yet filled in a tax return. It's just so hard to face doing it, and seems so irrelevant. However, this situation will no doubt bite us on the bum quite soon.
So at least you are more organised than we are!!
Boris Johnson did this for exactly the reasons you give.
You should get professional advice from a US/UK tax lawyer.
But I do believe that as a US citizen, you get very significant tax exemptions on inheritance/profits from house sales. An issue is more likely to arise if you die (sorry!), because your non-US spouse is not covered by these exemptions,and he is likely to have to pay a lot of tax on your estate.
You might find this interesting:
Most the other Americans I meet living abroad never file. This goes on for decades without problems.
It's worth renouncing if you have high value assets or income.
I'm surprised to hear other people don't file. I'd be scared of being fined for that, but then habing only returned to the UK 2 years ago I assume I'm on the radar.
Thanks for the article mrsmortis. I hadn't realised it was so expensive to renounce. That article does make it all sound quit scary.
chalalala surely my DH couldn't be taxed for inheriting from me, as he's not a US citizen, or am I misunderstanding? All of our savings, house etc are in the UK. I'll check out exemptions for inheritence as well.
I renounced nearly two years ago. I hadn't been filing tax returns but my mother died in the US and her estate caused me massive headaches and I quickly realised that going forward it would be much easier to only be a UK citizen!
I think if you have been filing taxes, you're pretty much stuck filing from now on. Most people don't ever file to keep themselves out of the system and prolong this for as long as possible
certainly my strategy prior to my mother's death The difficulty is that once you are in the system you can't really get out of it!
I think I had to back file 5 years of FBARs and 3 of IRS returns? I possibly did 5 of both- I can't remember! The actual renunciation process was pretty simple and I've just had an ESTA application approved for me to visit NYC in April so for me, there's been loads of benefits and no downside since I have no desire to ever live in the US again...
from what I've read on the BritishExpats forum, you should be able to obtain an ESTA just like any other British person would to go there on holiday.
I'm curious as to what happens to people who renounce and then decide they want to go back there to live, though. Can you have a family member sponsor you or get a work visa just like a regular non-US citizen can?
AlohaMama, yes, as far as I understand your non-resident alien DH could be taxed on your inheritence
The exemption is a lot higher than I thought, up to a couple million dollars. But if you have property it could add up quickly, also not sure how life insurance would be taken into account...
In theory gifts from US to non-US spouses are also taxable (!!!), although there's also some level of exemption.
I'm definitely no expert but I looked into all of this when I bought a house with my US husband, I talked to a UK/US lawyer who told me to put everything in my name as far as possible (I'm not US), as it would make things a lot easier with the IRS.
also I made DH back-file his tax returns and FBARS, which he hadn't been doing... yes it's a serious pain, but I'm a worrywart and it's just not worth the anxiety!
Thanks for the link AveEldon, it looks really useful.
chalalala it's articles like that that make me want to get out of the citizenship. I don't feel it's likey we'd have to pay tax as the exemptions are so high, but it seems like there are no end of ways to trip up by not filing relevant forms. In so many situations it won't occur to me that it has anything to do with the IRS.
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