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Becoming a US citizen through marriage and tax implications

Becoming a US citizen through marriage and tax implications

Old Mar 14th 2012, 2:12 am
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Default Becoming a US citizen through marriage and tax implications

Not sure the best way to phrase the question or indeed which forum is best but here goes.
I have a greencard through my marriage to a USC. I am now elegible to become a citizen. Apart from moral/philosophical/political objections to this the only concrete thing I have against it is the tax situation.
My question is: If I do NOT become a USC, give up my greencard and we return to the UK my wife of course will still have to file taxes here. Can she do so filing, single declaring her income alone (likely to be 0) or does she have to file married jointly, declaring my income too? If she has to declare all our income anyway then I might as well become a USC anyway. My income level is high enough that in the UK at least (with a good exchange rate) if we both work we might start to hit the boundary of the tax allowance and so get double taxed. More than that the sheer hassle and aggravation of dealing with US taxes is enough to put me off wanting to do it for the rest of my life, especially if I am not even living in the US!
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Old Mar 14th 2012, 2:30 am
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Default Re: Becoming a US citizen through marriage and tax implications

Originally Posted by angelman View Post
Not sure the best way to phrase the question or indeed which forum is best but here goes.
I have a greencard through my marriage to a USC. I am now elegible to become a citizen. Apart from moral/philosophical/political objections to this the only concrete thing I have against it is the tax situation.
My question is: If I do NOT become a USC, give up my greencard and we return to the UK my wife of course will still have to file taxes here. Can she do so filing, single declaring her income alone (likely to be 0) or does she have to file married jointly, declaring my income too? If she has to declare all our income anyway then I might as well become a USC anyway. My income level is high enough that in the UK at least (with a good exchange rate) if we both work we might start to hit the boundary of the tax allowance and so get double taxed. More than that the sheer hassle and aggravation of dealing with US taxes is enough to put me off wanting to do it for the rest of my life, especially if I am not even living in the US!
She would be filing married filing separately if desired and not include your income. However unless you have a large amount of unearned income that is not not taxed in the UK or another treaty country, being a USC isn't likely going to have any tax consequences.

First you can get the earned income and housing exclusion if desired and then offset any US taxes owed by using foreign tax credits accumulated above those exclusions to offset US taxes.

However if you want to make your life simple, then you just use UK taxes paid to offset any US taxes owed. Since taxes in the UK is generally higher than the US, you have plenty of taxes paid to offset any possible US taxes owed.

Where might get into an issue with the IRS would be if you went to a low tax country such as the Cayman Islands or to a country that doesn't have a tax treaty with the US (generally those are tax havens set up purposely to avoid taxes or for some other reason) and don't have enough foreign taxes paid to offset all the US taxes owed.
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Old Mar 14th 2012, 2:32 am
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Default Re: Becoming a US citizen through marriage and tax implications

You can file separately, but your bigger problem is that now you have a Green Card even if you abandon it you still might be on the hook for tax reporting. Some Green Card residents (long term and high net worth) who abandon their permanent residence can still be required to pay / report taxes. I think it is IRS Form 8854

Might want to look at this site:

http://www.irs.gov/pub/irs-pdf/p4588.pdf

Financially, here are some issues with US citizenship:

1) Filing taxes the rest of your life (not necessarily paying anything due to exclusions and treaties, but going through the paperwork hassle)

2) Filing the FBAR for foreign bank accounts > $10,000 USD

3) Filing the FATCA for foreign bank accounts > ~50,0000 (it varies depending on status)

4) Filing form 5471 if you own a substantial stake in a foreign business.

5) Dealing with overseas banks who don't like Americans (because of the reporting requirements above) and won't give you an account.

(p.s. I think you can both get the foreign income exclusion if you are both working, so basically double the amount if filing jointly)
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