To NOT want my children to get US passports?

[Daffodilly]

DH is American (by birth) but also has British citizenship. We met, live and had our children in UK. No current plans to move to US.

Children are entitled to get US passports as well as UK ones. But my understanding is that at same time they are issued with a social security number too and being US citizens has implications for future tax situation. US citizens are taxed on worldwide income, regardless of where they live.

I feel this could be a huge burden to place on our children when they may never choose to live or work in US. DH places significant value on US citizenship for them.

[Amphitrite]

One of my parents is American but my siblings and I were born and brought up in the UK and my parents didn't bother to register us with the US embassy here before we were 18. When one of my siblings decided to move to the US after university it posed huge difficulties. They are now a naturalised US citizen, but that took over a decade to achieve. My advice would be not to close off options for your children if it all possible as you don't know what they may wish to do in the future.

[Knowsabitabouteducation]

The filing threshold is $9750 for 2012.

You don't have to file if your earned and unearned income is lower than this.

When you file, you start off with all your income and then deduct $80000 from your earned income (foreign earned income exclusion). For the majority of people, this will bring their "adjusted gross income" down to zero, or almost zero. Next, you take your personal exemption (same as personal allowance in the UK) and exemptions for your dependents who have SSNs or ITINs, then your standard deduction.

If you still have a positive number at this point, you work out the taxes. Then you deduct foreign taxes paid.

You have to earn well in excess of £100k to owe anything.

[Knowsabitabouteducation]

Lljkk,

We have been using Turbotax for the last 10 years in the UK, although using an accountant this year as our finances have dramatically changed.

It's a simple program to use and it carries all your info forward from year to year. It will help you to decide whether to take the standard deduction or itemise, for example.

It does deal with state taxes but we have never used this part of Turbotax as our state allowed us to sever ties when we left.

[cleanandclothed]

As others have said, the issue is not the tax owed but the duty to file. But whatever you do, make a fully informed decision and get some advice first. I work for a bank and FATCA is going to make a big difference. You may find some uk banks will not want American citizens as account holders. And very silly for people to say 'this is only for rich people and not for ordinary ones' about tax returns. They might be right for them personally as adults ( not an attitude I would take personally though) but you have no idea how much your children will earn or where they might want to work, or how the US will change the rules in the future.

[lljkk]

How much does your accountant cost, btw? I asked a London accountant to do my US accounts one year and they quoted £800-£1200; I did them myself after all.

I'm finding prices of about £89 for Turbotax 2012, does that seem right? I assume Free version can't handle foreign-based residents, either.

[Knowsabitabouteducation]

We used the third one up in Turbotax - $79 is what I remember.

No idea how much the accountant is, but I know he has already saved us $$$ by finding an adjustment that we had absolutely no knowledge of. Turbotax wouldn't have picked it up.

[mathanxiety]

There is software available that can handle forrin addresses which may or may not be possible for Turbotax to accommodate.

[Knowsabitabouteducation]

Turbotax can handle foreign addresses

[SavoirFaire]

Seriously, those of you who aren't worried about filing a US tax return, please look up the FATCA regulations. You will have to tell your UK bank that you are a US citizen and they will be obliged to inform the US authorities. The US are tightening up significantly, to find those people who aren't filing returns (even if return would have you owing no tax), and if you are not, it could impact your ability to bank in the UK.

[cleanandclothed]

And those blithely saying 'there are double tax treaties to ensure you don't get taxed twice' well yes but it isn't quite that simple. And any uk resident married to a us citizen should get proper joined up us uk tax advice on us and uk inheritance tax when writing wills otherwise there may be all sorts of problems on death of the first spouse.

[Knowsabitabouteducation]

Nothing blithe about it

[dreamingbohemian]

I just think it's funny that it seems to be the people with accountants and tax advisors who are the most freaked about having to file US taxes. I mean, why? You're paying someone to do it for you!

I have to file (not pay) taxes in three countries. It's not rocket science and I do it myself, although in this one case it helps to be quite poor

I'm blithe about FATCA because I do file my US return.

Seriously, just be honest, follow instructions and get help if you need it. The IRS even has a help desk at the US embassy you can go to.

As far as I can tell FATCA will help crack down on tax dodging and money laundering and that's fine by me.

[eslteacher]

Tax issues aside, I can understand that your DH wants his children to share in his own national identity.

I'm living abroad in DP's country, and it would be important to me that any children we had understood and were able to identify with their British heritage.

I guess nationality on a passport could be viewed as just a legal thing and nothing more, but I think I would struggle to see it exactly like that.

[SquinkiesRule]

Well I'm glad to hear there are people succesfully filing US taxes from UK using Turbotax. Once Dh and I move back, we will have to file federal taxes annually, we'd like to collect our Social security and private pensions one day. Filing from UK was starting to really worry me. Here we have an accountant who does it all this year it only cost about £70 so worth it to us. under 100 for Turbotax will be well worth it.

[mathanxiety]

YY the aim of FATCA is uncovering the sort of sums that would make you rub your eyes trying to count the zeros. They have to cast a wide net -- that is the side effect of laws.

Riverboat, I agree about trying to share nationality, trying to have the children acknowledge that aspect of their heritage. It really is more than just a matter of convenience in Immigration lines. I was thrilled when DD1 decided to get her Irish passport and I am working on DS. Hopefully the rest of them will also claim their Irish passports (and therefore their children can also claim under Irish law). DD1's BF started looking into his Italian roots and investigating Italian passports when she was getting her paperwork together.

[Tasmania]

dreamingbohemian - It's because often, accountants and tax advisors have to justify being paid. By making something look a lot more complicated than they are, they do exactly that. If it was so easy, why would anyone employ them to do things for them?

Their clients - understandably - then tend to panic.

[missingmumxox]

it wasn't until I lived in the US, that I understood why 3 of my cousins who could claim US as could their Dads, didn't, Dads both did in their 30's, because they earned well under the balance and where you aware about the national guard thing? I think? as in you are conscripted from 18 whatever, don't need to report these days but it is what they used in vietnam.
I when I lived in the US used to call it a communist state..because really it is, my boys had to do the pledge of allegiance every morning, you have to be sooo careful what you say, no discussions on anything. I once got het up on the abortion issue as in I am for it, my GOD! so different to the UK where we could just discus it, do a few off color jokes and move on

[mathanxiety]

I agree with a lot of that Missingmumxox

[lljkk]

Ooh, hadn't heard of FATCA before. not that it impacts me (interest rates = 0.5%, anyone?).

I don't think USA can compare to over-regulated UK nanny state.

[marfisa]

Get the passports, definitely! As people have said, your DC will only be taxed in the future if they earn over $80,000 (and that figure is adjusted upwards every year to reflect inflation). If your DC decide that they don't want to be US citizens later on, for tax reasons or political reasons or whatever, they can always abandon their US citizenship themselves.

If you are a US citizen and have a child born abroad, you are supposed to register the birth with a Consular Report of Birth Abroad. You can apply for a passport and social security number at the same time. We did this last year and it is a bit of a hassle (you have to go to the US embassy in person), but once you've done it, it's sorted. If your child plans to become a US citizen, s/he MUST enter on a US passport the first time they visit the US. If they visit the US for the first time on a different passport, it may be impossible for them to claim US citizenship in the future. This is a silly rule IMO, but it's law, and I know from firsthand experience that US immigration can be incredibly ruthless and obstructive. Much better just to get the passport straight off and know that if they ever want to visit the US in the future, they will have no entry/exit problems.

We are a family with several different nationalities among us and we see dual citizenship as a good thing in an increasingly global world. It's a way of maximizing your DC's choices. Even if they never want to live or work in the US, they may one day be curious about exploring the place their dad comes from, and if they have passports, they can visit freely. Not getting them a passport at this point would be limiting their future choices (especially if you take them to visit their dad's family in the US at some point, and they go on a British passport).

Imagine how you would feel if the situation were reversed and you were all living in the US and your partner argued that your DC didn't need British passports?

Dual citizenship is a gift; give it to your children if you can and then let THEM abandon it later if they don't want it.

[marfisa]

And missingmum, there is no mandatory conscription to the National Guard; that's rubbish.

[claudedebussy]

i believe that you still have to file tax returns even if you're under the limit.

i would be very wary before doing anything. make sure you have all the facts.

american liberties are being eroded all the time.

[marfisa]

Yes, you still have to file tax returns, but as dreamingbohemian said, it's not hard to do.

I usually forget to file my tax returns for years and then file about five years' worth at one go. I never owe anything and have never been penalized for filing late (if I did owe anything, I'm sure there would be penalties, but my income falls well below the foreign earned income exclusion threshold).

I totally agree about the US and civil liberties. Due to their own stupid bureaucratic error, they ordered my DH deported (it's a long, LONG story) and it took us years of effort and thousands of dollars to fix it. It's one of the reasons I'm happy to live in the UK now instead of in the US. However, it's also one of the reasons I am so keen on getting dual nationality for my DC. Just because I don't want to live in the US any more doesn't mean that they might not want to, and the way the US treats non-nationals is not pretty.

[megandraper]

I had dual US and UK nationality from birth. I eventually gave up my US passport in adult years. This was a difficult and expensive process, and you can't just choose to give it up - you must be able to prove you have one of a few specific reasons. I did not give it up for tax reasons, but for other personal reasons (it is illegal to give it up for tax reasons). You must also pay an one-off 'expatriation tax' on all your property/savings above a certain amount.

Yes, you have to file a tax-return every year. It is very difficult to understand all the rules and I paid a firm to do it, which wasn't cheap, and I always had tax to pay although my income wasn't unusually large (I had a good professional job). I received an inheritance during this time, and had to pay a chunk of it to the US government, over and above the chunk I also had to pay to the British government. Although there are reciprocal tax agreements, that doesn't mean you don't have to pay - your tax has to be worked out by both sets of rules (which are completely different, and even operate on different time-scales - the US tax year is Jan - Dec) and then you can set most of your British tax payment against your US one.

For example, if you have investments in the UK like unit trusts - in the UK you don't have to pay tax until you cash an investment in (and see how much it has made or not in profit) - however in the US you have to pay tax every year on the 'notional' profit - how much you would make if you were to cash it in, even though you haven't. The admin can be nightmarish.

It is something to think carefully about, IMO. If you do it, make sure that when your children become adults, they familiarise themselves carefully with all the rules, and the process for giving up the passport (which is not straightforward). If they do well in life, they may find it expensive and difficult to give up the passport later on.