Experiences of dual citizen US DC renouncing citizenship at 18

[TheCryingTheBitchAndTheFloordrobe]

Sorry, this is a bit of a niche one and I'm not exactly sure where to put it.

My DC have citizenship of the US and UK. We live outside the US and at present they only hold UK passports (they've had US passports previously).

The oldest DC will be 18 in a few months and is trying to decide between just renewing his US passport and sucking up the tax hassles or revoking his US citizenship. Friends who've revoked have said it's an onerous process and very expensive.

Wondering if anyone else has been in the same position and what you decided in the end.

Please get your children their SSNs as soon as possible. It is essential to file taxes and to renounce. There are also lots of horror stories online of people with no SSN living abroad who can’t open bank accounts or get a mortgage or even access their own assets because banks require their SSN to meet the US gov requirements to declare all US citizens who bank with them. It is so important. Do not delay.

They can renounce their citizenship free of charge and free of much hassle before the age of 18 but there is still an administrative process which even as a child they may need to show up in person for. I waited 2 years to get a date to renounce at the embassy. I hope that a child may not need to, as obviously your DC only had a few months. I renounced as an adult and didn’t need any lawyers or accountants, although there are many who will happily charge a large sum of money for their services. The most important thing is to be up to date with all tax returns and FBARS, and to file one final time after renouncing. I wish I’d renounced at 18 but I didn’t feel able to make an informed decision then, so I waited another 20 years until I was married with children and obviously not returning.

Why are they considering keeping their US citizenship? How much of a connection do they and the rest of your family have? Are they very interested in going there for work some day? If they have never lived there as adults then they are unable to pass their American citizenship on to their own children.

I renounced recent and it’s been a huge relief

The tax situation is only problem free if you are a low earner with no property or investments

If you sell a property and make a gain, that gain is taxable under US rules (see Boris Johnson)

ISAs are taxable under US rules

As soon as you have any investments outside a pension the annual filing becomes complicated and expensive and if you make any sales of such investments you will be taxed punitively on them

Renunciation is expensive after 18 as you have to pay a fee of $2500 (after age 18 & 6 months iirc) and be up to date with past 5 years of tax forms. And there is a waiting list.

Some banks will not take on US citizens due to extra reporting requirements

Don’t rely on never being found - you say the US is already aware of his citizenship somehow and systems are improving all the time. With current and improving computer systems it is dead easy to cross check lists of names.

If it was my child I would advise them to renounce in a heartbeat. The ability to move to the US is really not that golden. Can’t pass it to his kids as a pp said. And many non US citizens move to the US via their work anyway.

But your decision.

Oh just to add: if your child does not renounce at 18 and was not a dual citizen from birth then there is also an Exit Tax on renunciation which is huge if you have any significant assets. So another reason to renounce early

Are there tax hassles? My friend has UK, EU and US passports (I know, lucky bugger) and I don’t think she’s ever paid taxes to the U.S. as she’s never lived there.

Anyone with US citizenship is legally supposed to file a tax return in the US every year, simply because she is a US citizen. Living there or not is irrelevant, having US income/assets or not is irrelevant. It’s a weird system.

In theory your UK taxes get deducted from any US taxes you would owe, so most people end up owing zero US tax as most UK taxes are higher. But there are exceptions - for example the UK doesn’t tax gains on the sale of your home but the US does, also any ISA gains are taxed there but not here. And they still expect you to file a return even if you’d owe nothing.

If the IRS ever comes knocking your friend will owe them any back taxes plus interest and fines for not having filed tax returns over the years.

There are plenty of US citizens in this situation so I’m sure the IRS has a backlog and may never get round to chasing. But it’s a gamble.

I agree that renouncing before the age of 18 is highly advisable, but we also don’t know your son. Have you and he looked into the required paperwork and timelines? He may not even have time to renounce before 18 and avoid the huge renunciation fee.

You only have to pay the Exit tax above if you are a “covered expat.” Further info available online and highly unlikely to apply to your son now or even in the medium term (if ever). Again, filing taxes etc is part of this.

I have never filed a US tax return.
I have all the numbers.
UK tax is higher than US so they would owe me money for every single year if they came calling.

At least one family member was 'invited' to stop submitting forms to the IRS
after they had to pay out money every year

Many contacts also do not bother with US returns - especially those who live in high tax European countries

Taxes are pretty easy to file each year. We don't earn anywhere near enough to be taxed in both US and UK. I do it online with H&R block expat. quite inexpensive, I print it all off and post it to the US tracked.
I find the UK self assessment tax return more of a pain to do.

We don't earn anywhere near enough to be taxed in both US and UK

It’s not just earnings. If you own your home, any gain when you sell it will be subject to US tax. Also if you have any ISAs, any increase in value when you come to use them will be subject to US tax. These are both tax exempt under UK rules but not US rules.

UK tax is higher than US so they would owe me money for every single year if they came calling. At least one family member was 'invited' to stop submitting forms to the IRS
after they had to pay out money every year

😂 it really doesn’t work like this, the US doesn’t pay you if your UK tax was higher! If only!!

it really doesn’t work like this, the US doesn’t pay you if your UK tax was higher! If only!!

They did.
Three years running
and then asked for tax returns to cease.
Have all the letters on file.

Double tax agreements are interesting things

Certain tax credits are refundable and it is possible to get money back even if you're not resident in the USA. The US tax system is complex.

I'm a US citizen, raised in UK. Went there to work in my 20s, duly filed tax returns while there. Had no idea I was supposed to have filed them for the years before working in the UK. Got an absolutely terrifying bill out of the blue for the years not filed. I resolved it by filing retrospective tax returns for those years, so it was all sorted. As PP have said, the forms are very straightforward if tour finances are straightforward. I did my own for years after that, but now, as they got more complex, I use a specialist accountant whose fes are deductible. It is a pain, but not a huge hassle.

Is it true though that my born abroad US citizen children can only pass their citizenship on to their children if they live there?! I had never heard of this.

The rule is that it's passed on regardless of residency if both parents are citizens. If only one parent is a citizen they have to have lived in the USA or its territories for a certain number of years. I think it's 5 total with 2 coming after the age of 14. They don't have to be currently resident, just have lived there a certain number of years.