Nat.haw

Hello, I'm new to this site so I hope I'm in the right place.
My daughter was born in the US (British mum, American dad) but raised in the U.K. since she was a baby.
I stumbled across an article yesterday about Tax obligations for US citizens with dual nationality.
My understanding is that my daughter has to file taxes in the US?
If so, it's a good job I found that article or we would never have known!
All the info I've found online is very vague and I'm hoping someone here might be able to explain it to me?
Most importantly at what age/time will my daughter have to start filing taxes? And how on earth would she go about it?!
Thanks in advance for any info

morpeth

I believe generally would be age 18, unless she began work earlier- but there is also a minimum income required before having to file a tax return, I believe around $10,000 but you could look up the exact IRS regulations online with that. As far as filing the return short of doing yourself and mailing it in, most accountants in USA can do via email and file electronically.

Interesting to also check out if she goes to university whether as a US citizen living abroad she qualifies for grants or student loans as many universities in UK qualify for such grants and loans. For example the Pell Grant which doesn't need to be paid back.

If she doesn't have social security number , she probably does have, worth applying for one at some point.

Nat.haw

Thanks for the reply
I never thought about the university point you mentioned!
I'm realising there's a lot more to her dual nationality than I thought.
She does have a social security number and did have a US passport but that has expired now.

morpeth

Probably worth renewing the passport, who knows what regulations may come about in the future.

The university issue if she plans to go to university worth looking into. Generally the student loans are fairly automatic to get - one type is simply a loan regardless of circumstances, the other is means tested, and repayment can often be based on a percentage of income in the future. I do not know if one has to be a resident in USA at the time of application but I don't think so.

If at any time she has over $10,000 in a bank account or other financial assets, she has to file additional paperwork ( under FBAR regulations, form I think if FinCen114)/ Most UK banks now routinely report to US government if US citizen has that amount n their UK account, and most UK banks nowadays I think as if someone a dual citizen.

BritInParis

US citizens are required by law to enter and exit the US on a US passport so it'll be worth keeping her passport up to date.

morpeth

Does UK have same rule ?

BritInParis

It's not mandatory but if you don't show a British passport then you should be treated as a citizen of the country of the passport you are presenting. It's not therefore advisable to use a non-EU/EEA passport for anything other than short visits.

Cook_County

She is required to file tax returns & FBARs when she meets the relevant filing thresholds. Her age is not a factor. You will naturally only select investments that are "US friendly" (eg avoid PFICs).

Giantaxe

She may want to think of renouncing if she is sure she doesn't want to reside in the US in the future. Don't think she can do that until aged 18 (?) though.

WEBlue

For an overview of some pertinent issues, here is the BE Wiki on this topic:

Non-Resident USC Obligations : British Expat Wiki

Your daughter is an "Accidental American", a term that covers several categories of connection and/or obligation.

penguinsix

Tax returns are based on income, not age. Child actors for example have to file a tax return eventhough they are well below the legal age of adulthood. If they meet the minimum filing requirements, which I should note are quite low, they need to file a tax return.

That said, because of treaties and exclusions and whatnot they won't actually OWE any taxes until they are making a significant amount of money, but the requirement is there once you start making a certain amount to fill out the form.

My general advice is to file every year, regardless of your income levels, just so you have a paper trail.

I would also note the FBAR bank account reporting requirements. If they have more than $10,000 USD in a bank account (or the sum of multiple accounts) then they have a disclosure form they need to fill out as well called FBAR.

Please take a look at the WIKI article as it goes through many of these items.

Nat.haw

Thank you everyone for your replies. Really appreciate it

morpeth

I think you are right file every year of one has income or after age 18, but certainly couldn't see filing a USA tax return with no income and under 18 .

Steve_

There is no age limit, it depends on when she's got enough income in order to have to file a return. Have a read of IRS publication 54, most of the information is in there. https://www.irs.gov/pub/irs-pdf/p54.pdf

Also she may have to file the FBAR at some point if she has enough money in a bank account in the UK.

Typically the forms the average person needs to file are:

1040
2555 (or 2555-EZ more likely)
8938
8965 (I think this will be scrapped for the 2018 tax year)
quite commonly 1116 if you have investment income

The FBAR is the most important as it's a criminal offence not to do it. Look up FinCEN FBAR.

Also she'll need an SSN, she can file for one at the US Embassy on form SS-5 if she hasn't already got one (but she probably has).

The main sticking point from the UK end are ISAs. ISAs are taxable in the US which usually makes it pointless to have one, except perhaps a simple cash ISA as those are taxed like savings accounts. Pensions are covered under the tax treaty so no problem.