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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

To not want to pay tax as an "Accidental American."

234 replies

budinbloom · 08/06/2018 15:06

Help! Is anyone facing/has faced this recently?

DH is a dual UK/US national from birth. (English Dad, American Mum, born in the US but left for the UK as a baby and never lived or worked there since). He received what we now know is a "FATCA" letter recently and after copious googling and increasing panic, it looks like he is supposed to file tax returns to the US and potentially pay tax on the funds he holds in his ISA. Luckily, they aren't threatening to close his account....yet but the internet says that is what's happening in other countries!

We're still flapping but becoming resigned to the fact that, we have to pay to enter a foreign tax system in the first place before we can exit and renounce his US citizenship if we are to even plan for our future retirement. We're still at the going backwards & forwards stage - should we/shouldn't we? It's so unfair? What do we do? How would they know? We can't lie/nor do we want to? At the same time, we don't want to pay ANY tax to a foreign government on our already taxed UK income. He's always been PAYE here! Is the final solution renouncement but this process which will involve backfiling tax returns which we should never have to do, in the first place and will costs thousands (yes, we've got a few general quotes for the work).

We really want to keep hold of his stocks and shares ISA. Do we only really need to sell the funds in them but keep the actual direct company shares? No-one seems to admit to having anything other than cash ISAs but is that because they have already sold them in advance of filing for the first time? No idea what to do without paying even more for expensive legal/tax advice.

OP posts:
underfall · 15/11/2018 11:39

Link to the information on INA Sec. 349:

www.uscis.gov/ilink/docView/SLB/HTML/SLB/0-0-0-1/0-0-0-29/0-0-0-10446.html

TFELUS · 11/06/2019 22:16

This reply has been deleted

Message deleted by MNHQ. Here's a link to our Talk Guidelines.

HomeOrAway60Plus · 14/01/2020 14:55

Right now I’m sitting in a cafe next to the US Embassy in London, having just renounced. I now have to wait and see how much I owe the US Government in taxes, despite leaving the country at the age of one, 60 years ago. The whole thing is unbelievably stressful and seems so unfair.

I’ve had contact with a tax advisor in the US via an online forum, but I’m nervous about doing anything with someone so remote.

Does anyone have any recommendations for people in the UK? I’m in Norfolk, but will travel within reason.

underfall · 24/02/2020 17:21

HomeOrAway - Congratulations on your brand-new single citizenship. If you don’t have any US income/assets, and are being taxed by HMRC, you shouldn’t owe any US tax, and can truthfully file Form 8854 to certify that you have been compliant with US tax law. That’s what I did, and the US was perfectly happy about it. To illustrate, here is my story:

I was born in the US, and lived there until I was 25. In 1965 I moved to the UK. From then on, all my income was UK income, fully taxed by the UK, so I never had income that would have been taxable by the US, and I never filed a US tax return after I left America.

For years I was a dual citizen. But I renounced my US citizenship in 2015, because FATCA was making it difficult for me to open bank accounts. The following year, I filed Form 8854 to tell the IRS that I was no longer a US. citizen. That’s all I had to do.

Serendipitously, while I was in the process of renouncing, I discovered that I was eligible for a (small) US Social Security pension, because of time I worked before I left. The Social Security branch in the London Embassy handled my application, and helped me get my social security record amended to show that I was no longer a US citizen. Nowadays I receive a small monthly payment every month - taxable only by HMRC. I mention this to show that the US government had no problem with my renunciation or with my 8854.

So you may want to consider just filing the 8854 and leaving it at that.

However, if you do opt to file US tax returns, I believe there’s a list of UK-located tax advisers somewhere on the US Embassy site. Good luck.

microbean · 04/07/2022 13:53

My DH is also struggling to open bank accounts. Are you saying that when you renounce your US citizenship you do not have to file a tax return at all? Do you think that may have changed in the last few years?

BritWifeInUSA · 04/07/2022 13:59

microbean · 04/07/2022 13:53

My DH is also struggling to open bank accounts. Are you saying that when you renounce your US citizenship you do not have to file a tax return at all? Do you think that may have changed in the last few years?

this is a very old thread and the original poster may not be around any more. But that is correct. If you renounce your US citizenship you no longer have to file annual tax returns with the IRS. Unless you move back to the US, of course.

sorafon · 04/07/2022 16:38

I am amazed that there are so many replies to a serious query that is so beyond the scope of Mumsnet. And unsurprised that most (perhaps all, I haven't read most of them) are not of great quality. Suffice to say I know something about the substance of "accidental Americans". You will find that there are groups of activists on Twitter and on Facebook. And that there are dozens, maybe many dozens, of accountants and lawyers eager, as the "compliance condors" they are, to take your money. There are two good American lawyers who specialise in renunciation and associated tax issues: John Richardson (search for him by name, as Toronto lawyer (he's a dual national)) and Phil Hodgen. John is the more reasonably priced -- far more reasonably than any of the dozens whose work I have had reason to judge. I am a retired tax and bankruptcy lawyer.

The first and most important advice is not to panic. Nothing is going to happen to you. If you have no assets, income or heirs in the USA the IRS is not going to pursue you. The issue you face (as you noted) is the possibility that a UK financial institution may refuse to do business with you until and unless you get a Social Security number (or ITIN, but you can't have an ITIN b/c you're a US citizen). Your assets cannot be seized for payment of U.S. taxes. Unfortunately a U.K. accountant or lawyer is stuck with a rather unfortunate U.K. "ethics" rule that requires him/her to insist you pay all your taxes, domestic and foreign. That's why I discourage you from contacting any UK-based professional, who anyway would have to charge you 20% VAT.

You can, as one of my (many) daughters did, renounce U.S. citizenship on your own. You have to download some forms from the U.S. Embassy's consular Web site and you have to make an appointment, answer some questions, pay $2,350 by credit card, and swear an oath. A few weeks later you get a Certificate of Loss of Nationality and your name will (probably) be published in the Federal Register.

A "compliance condor" would tell you that you must get a SSN, fill out 5 years' back tax returns and another one for the current year, complete IRS form 8854, and pay any back tax due. You also will be told you have to fill out FBAR forms (that is done online, Google "FBAR"). If you fail to do so, you become a "covered expat". The significance of that is that any American citizen or resident who inherits from you will have to pay 40% tax. You could also owe capital gains tax on the deemed value of all your assets and pensions except State Pension. If you do file form 8854 (which means you also need a SSN and would probably want to use the IRS Streamlined practice which is usually penalty-free (Google: site:irs.gov streamlined -- and watch out for private companies and shyster lawyers who want to frighten you and get big fees).

A lot depends on your age and your future intentions. It's unlikely you have minor children for whom you want green cards because they are not US citizens from birth (because, like my daughter, you never lived in the USA). The cynical but practical decision might be just to renounce for $2,350 and do nothing else. Once you have a CLN your bank will no longer want IRS form W-9 but maybe will want form W-8BEN, which is used by non-US and ex-US citizens.

If you have questions I'll be glad to answer either here on on FB (as Sora Fon). I am not your lawyer, I do not take clients, I cannot be paid.

One last reference: Google "FATCA Globalex" for a long and scary article on the penalties asserted against Americans who were actually guilty of hiding money abroad and not declaring it or paying tax on the dividends, interest and gains. That doesn't apply to you: you were not wilful, you are innocent, you knew nothing.

Best of luck.

sorafon · 04/07/2022 16:43

Read what I wrote to the OP. You need not pay money to an expensive accountant or lawyer. If you have no assets, income or heirs in the USA it doesn't matter that you would be a "covered expat" if you didn't file 5 years back tax returns, use the (penalty-free) Streamlined IRS system, and file IRS form 8854. Nobody can do anything to you. If you do want advice you could do worse than ask John Richardson. I understand he charges $500 for basic advice. He wouldn't charge anything just to chat for 5 minutes. He can be found online; he lives in Toronto (he's a Canadian-American lawyer). Check on Facebook and Twitter -- there's lots being said on the subject of FATCA and renunciation.

SunSparkle · 20/07/2022 08:42

I contributed to this thread awhile ago and I still haven't renounced. I'm just filing my tax returns and FBAR each year and paying $10 or so on a measly amount of ISA interest but I don't have particularly complicated income. I just know I need to sort it before I sell a house in the UK as I understand that may have tax implications.

The most annoying thing is that I can't open a pension/stocks and shares account that I want to because the UK institution won't take me as a dual national. I just can't justify paying $2350 just to renounce at the moment. I was hoping the Biden administration might address this but I guess they are busy with lots of other things. $2350 is a huge amount of money for us as a family with a toddler having just been on maternity leave so I think I'm stuck paying an accountant $300 a year to do my tax return until I can afford the renunciation fee.

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