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Renouncing US citizenship or applying for a passport - help!

Renouncing US citizenship or applying for a passport - help!

Old Jul 27th 2017, 5:00 pm
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Default Renouncing US citizenship or applying for a passport - help!

Hi,

I have a bit of a confusing situation and I'm not sure what to do...

I'm 31 years old and was born in the USA to British parents. I only lived in the USA for 6 months or so, and then we moved back to the UK where I have lived more or less all my life. I've visited the USA on holiday a few times but otherwise have no links there. I have a British passport, a consular British birth certificate, but on my passport it says my place of birth is NC, USA.

I have recently discovered that as I have US citizenship I have to use a US passport to enter and leave the country OR show a letter renouncing my citizenship (which has never been a problem when I've visited in the past - it's been commented on, but nothing more than that).

I don't have any immediate intention to go to the USA but it would be nice to have the option open to me in the future just for holidays or whatever. I'm scared to open this potential can of worms though- I've never filed a US tax return so I'm scared that I might owe tax and I have no idea how much it could be, and I've read somewhere that renouncing my citizenship costs a lot of money too. Asking anywhere official might get me on the radar which I'm currently flying below, and if it's going to cost a fortune or be a huge hassle, I might just continue to ignore it.

I hope this doesn't come off as flippant - it's been at the back of my mind for a while, but I'm burying my head in the sand as I just don't really know where to start or what the implications are. I've asked my parents about it in the past, and they've just said "you're British, don't worry about it", which isn't very helpful!

Hopefully I've provided enough info and someone can advise!
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Old Jul 27th 2017, 5:46 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Originally Posted by LH1986
I've never filed a US tax return so I'm scared that I might owe tax...
The US taxes her citizens on their worldwide income. US citizens, by law, are obligated to file a US tax return annually unless they earn less than the IRS threshold for filing (see www.irs.gov for details). It's highly unlikely that, even after all this time, you'd actually owe any taxes - because the US/UK tax treaty would help you avoid double taxation and if you've paid taxes on earnings in the UK then you won't be taxed from the US. Note also that many USCs living outside the US don't file US tax returns. They're supposed to, but that's really an IRS issue... not a US immigration issue.


I'm burying my head in the sand as I just don't really know where to start or what the implications are.
If you want to renounce, that's up to you... but it's not just about you! What about children! If you give up US citizenship, then they may never get a chance to live or work in the US.

If it was me, I'd never renounce - because, as Yoda noted, "... difficult to see... always in motion the future is." To me, the burden of filing a US tax return is nothing... and now that you know you're supposed to, you can start.

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Old Jul 27th 2017, 5:53 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Worst case scenario, If they want to tax you, they won’t go back more than six years max, usually only three: https://www.irs.gov/businesses/small...udits#far-back

Even if do you owe, might be able to get out of penalty for reasonable cause claiming didn’t know had to pay: https://www.irs.gov/businesses/small...asonable-cause

Personally, I wouldn't renounce citizenship. Might be worth sitting down with an accountant experienced with international tax.
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Old Jul 27th 2017, 6:16 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Originally Posted by ian-mstm
.... If you want to renounce, that's up to you... but it's not just about you! What about children! If you give up US citizenship, then they may never get a chance to live or work in the US. ....
It's worth noting that while LH1986 is a US citizen as it currently stands (having only lived in the US for six months in his/her life), he/she is unable to pass US citizenship to his/her children, and therefore would only be able to "help" any chidrlen they have by accompanying them to live in the US, where they too would obtain US citizenship upon entry to the US.

If LH1986 lived in the US for three years, then he/she could transmit citizenship to his/her children.

I would also note that with a US passport you will have a right to visit the US, on the VWP or with a visa you have no such right and always run the risk, albeit perhaps very small, of being denied entry.
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Old Jul 27th 2017, 7:32 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Well, as normal, there's a lot of misinformation in this thread already.

LH1986, you are experiencing an examination of your US citizenship similar to what 10,000s of individuals all over the world are pondering at this very moment. Be wary of information from those who have never lived abroad as a USC.

Are you employed? Do you have a UK pension? Do you have UK investments or bank accounts? Do you ever intend to open a new bank or savings account? Invest in an ISA? Do you ever intend to plan for your future or make provisions for retirement? Own a home? Receive UK benefits? If so, you must forget all about what the tax rules are in the UK and instead plan for all of the above according to US tax rules. You will find yourself at a disadvantage compared to the normal UK citizens you live and work with.

You need to ask yourself a serious question. There are no halfway house answers.

Do you want to, someday, live in the US? Do you plan to never, ever live in the US. Again, no halfway answers. It's either yes or no. Once you decide, let us know and we'll be able to assist with some suggestions.

P.S. - The US/UK Double Taxation Agreement does not prevent the US taxation of 99% of all income received in the UK by a US citizen.
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Old Jul 27th 2017, 7:37 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Thank you for responses so far!

I plan all of the things you have listed above!

To answer the final question above - I suppose it would be a no, I don't plan to ever live in the USA. I always thought it would be cool to live there for a bit, but realistically, our lives and families are in the UK so it's very unlikely to happen. Go on a trip, yes, but live for several years - no.
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Old Jul 27th 2017, 8:08 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

The cost and hassle of renouncing your citizenship is likely to outweigh any tax benefits as you have to pay the fee of $2350, an 'exit tax' which is calculated on your net worth over the last five years and any fines or penalties for late filing. It's also worth mentioning that FATCA may very well be modified or scrapped outright as it's catching people like yourself out rather those it was intended to, i.e. high net worth individuals looking to hide their wealth offshore. Personally I would obtain your US passport now in preparation for any future visits (it's valid for ten years) and keep an eye on any repeal of FATCA.
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Old Jul 27th 2017, 9:02 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Originally Posted by LH1986
To answer the final question above - I suppose it would be a no, I don't plan to ever live in the USA.
Let me start with a caveat - any of the above, and any that follows, is not meant to be scaremongering. I promise you. But, you have to start with a realistic assessment of your position.

I'm sure you understand, giving up any citizenship is not an easy thing to do, and should never be taken lightly.

Flying under the radar (head in the sand) has worked well in the past for many. Unfortunately, times are changing. We have FATCA to thank for the increased difficulties, and a vengeful group of US politicians, but there are attempts to mitigate the effect arising from the law.

Things may change for the better. There is a possibly the US Congress may void the US method of US Citizenship taxation. It's a very slim (no, remote) possibility, but it's probably the best chance we'll ever have. If that were to happen, being a dual citizen would no longer be a burden for you, or indeed, for any of us. We that live in the UK with the taint of US citizenship could go about our lives in a perfectly normal way.

On the other hand, if it were to happen, nothing would prevent a future Congress from reinstating citizenship based taxation. We live in interesting times.

Have you opened a UK bank account lately? If so, have you been asked about any other countries of which you are a resident for tax purposes? For you, the answer must be yes, and that country is the US. If so, you must give your US Social Security number. You do have a US SS number? Applied for a US passport lately? You must give your US SS number. It's US law that all US citizens must enter and leave the US on a US passport. In the past, generally, entering on a UK passport was never an issue. But more people are reporting they are receiving a reminder, and their record is duly noted for their next entrance. Nonetheless, even with the reminder, there has been no instance that I have seen of someone being denied entry to the US.

If you are certain you have no desire to ever live in the US, I would suggest you fully investigate what is required to renounce US citizenship. If you intend to do it correctly, the minimum cost is $2,350 (£1,800),... at the moment. But to do it correctly, you also have to file 5 years of past tax US tax returns and 6 years of past FBARs. Some run the risk of an Exit Tax, but save that for later since it is unlikely for you (although, I don't know your situation). Bear in mind, renouncing is not dependent on the filing of the tax returns or FBAR, although the consequence is living with the threat of being caught out in the future, and at that point it will be very expensive. So now, an additional caveat. Some of those who have renounced correctly say they wouldn't bother with it if given the chance to do it again. The caveat - they intend to never set foot in the US again, and that includes flying on any airline flight which may inadvertently be forced to divert to the US.

My suggestion, if you really are concerned about the effects of your US citizenship, would be to research all possible what is required to renounce, but equally I would suggest you hang tight and wait and see what may transpire in the next 12 to 18 months regards Congressional action on US citizenship taxation.

You've not had a problem so far, and I would predict there will be no black helicopters flying above your house followed by a knock on the door by some surly men in sunglasses. Keep going as you are going, but be aware that eventually (and possibly quite soon) you will need to make a decision.

NOTE: cross post with BiP.
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Old Jul 27th 2017, 9:06 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Nope, no social security number!
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Old Jul 27th 2017, 9:12 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Originally Posted by theOAP
It's US law that all US citizens must enter and leave the US on a US passport. In the past, generally, entering on a UK passport was never an issue. But more people are reporting they are receiving a reminder, and their record is duly noted for their next entrance. Nonetheless, even with the reminder, there has been no instance that I have seen of someone being denied entry ....
Nor indeed will there likely ever be, because it is illegal to deny entry to the US to an American citizen. A fact that CBP are perfectly well aware!
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Old Jul 27th 2017, 9:28 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Originally Posted by BritInParis
The cost and hassle of renouncing your citizenship ......
Yes, those are the hurdles that must be navigated to discard US citizenship. Canada also has an Exit Tax, but it's far more civil and far less punitive. Why does relinquishing citizenship have to be punitive?

Originally Posted by BritInParis
It's also worth mentioning that FATCA may very well be modified or scrapped outright
Yes, your link is to the 'dog and pony show' held by those opposing FATCA (and for that session, FATCA only. CBT was not discussed). Times have moved on.

Both the session and Rep. Maloney's Bill (safe harbour) have currently been set aside regards further action. The current plan is to make individual expat taxation fall in line with the proposed attempt to create 'Territorial Taxation' for US companies. There has been a concerted effort by those involved (Congress, ACA, Dems. Abroad, and of course Republicans abroad) to combine the two and prove abolishing individual expat taxation will be revenue neutral. A brief foray into the issue for expats: (give it 60 seconds to reach the cost of employing a US expat)
https://www.youtube.com/watch?v=4x1i...ature=youtu.be
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Old Jul 27th 2017, 9:33 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Originally Posted by Pulaski
Nor indeed will there likely ever be, because it is illegal to deny entry to the US to an American citizen. A fact that CBP are perfectly well aware!
But there are new laws that prevent a US citizen, once in the US, from leaving the US as a consequence of tax reporting difficulties. They, also, have yet to be enforced, and at the present, probably won't be where US expats are concerned.
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Old Jul 27th 2017, 9:42 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Originally Posted by theOAP
Yes, those are the hurdles that must be navigated to discard US citizenship. Canada also has an Exit Tax, but it's far more civil and far less punitive. Why does relinquishing citizenship have to be punitive?
Because FATCA was causing so many to give up their US citizenship. A combination of the additional costs those applications have brought and the last chance for the IRS to grab whatever tax it can.

Yes, your link is to the 'dog and pony show' held by those opposing FATCA (and for that session, FATCA only. CBT was not discussed). Times have moved on.
I must confess it's not a subject I'm an expert in. I knew there was a move to repeal FATCA and that was the first thing that Google threw up.

Both the session and Rep. Maloney's Bill (safe harbour) have currently been set aside regards further action. The current plan is to make individual expat taxation fall in line with the proposed attempt to create 'Territorial Taxation' for US companies. There has been a concerted effort by those involved (Congress, ACA, Dems. Abroad, and of course Republicans abroad) to combine the two and prove abolishing individual expat taxation will be revenue neutral. A brief foray into the issue for expats: (give it 60 seconds to reach the cost of employing a US expat)
https://www.youtube.com/watch?v=4x1i...ature=youtu.be
A case of watching this space then.
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Old Jul 27th 2017, 10:39 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Originally Posted by BritInParis
Because FATCA was causing so many to give up their US citizenship. A combination of the additional costs those applications have brought and the last chance for the IRS to grab whatever tax it can.
I won't bore you further, but for the dual citizen who has all their financial activities in the UK (with few US accounts of any type) the 'cost and hassle' of financial planning (if they intend to carry on as a passport carrying fully compliant USC) is more than equal to the 'cost and hassle' of renouncing USC. That's especially true for the younger 'accidental' person with their financial planning ahead. Aside from those USCs abroad who are required to relinquish USC in order to obtain citizenship in some countries, FATCA became the final straw.

Most have no problem with being a USC, it's the tax compliance that becomes untenable. The number of renunciations will probably continue to increase, even if FATCA is abolished for the expat, as a result of the 'noise' around FATCA making more and more USC expats aware of their compliance responsibilities, and their unwillingness, now that they fully understand the consequences, to sacrifice their financial future simply because they are a US expat.

Those retiring to the UK with all their financial assets located in the US find it somewhat easier to carry on, provided they intend to continue most financial planning in the US, and not the UK (and they can keep up with the greatly increased and mystifying US reporting required for anything 'foreign' they own). US assets are not 'foreign' and it's the foreign aspect that creates the difficulties under the present US tax code.
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Old Jul 27th 2017, 10:46 pm
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Default Re: Renouncing US citizenship or applying for a passport - help!

Originally Posted by theOAP
But there are new laws that prevent a US citizen, once in the US, from leaving the US as a consequence of tax reporting difficulties. ....
Which is almost certainly unconstitutional.
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