Yickbob13

Hi - new to the forum. I am hoping to get some clarity on an issue that, hopefully, is a non-issue. I was born in the US in 1960 to British parents, registered with the British Consul, returned to the UK, emigrated to Canada as a child, returned to the UK as a young adult, and returned to Canada as an older adult (though I may move back again - being a dual-citizen is annoying that way...). I recently found out that the US is the only country in the world that taxes it's citizens even when they are non-resident. Do I have to worry about Uncle Sam coming for me or should I be making arrangements to renounce my US citizenship that I have never claimed in the 1st place? I will understand if this is too off-topic for the Canada forum but if someone has any insight or can suggest another thread I would be very grateful. Cheers!

Novocastrian

Technically you are a USC and should have been filing non resident tax returns since you staeted working.

I think for you it's a case of "let sleeping dogs lie" but probably best to avoid entering the US again, since you're supposed as a USC to only do that on a US passport.

Really, they're rather stupid on these issues.

Yickbob13

Thank-you so much for the quick reply! I travelled to the UK this year via the US on a Canadian passport & no dogs 'woke up'. Hopefully it's similar to all those weird laws that remain on the books but are never enforced. It is a little unsettling though - I know that one can renounce one's USC - maybe I should look into that... Thanks again & happy holidays!

Novocastrian

You can renounce and perhaps that would be the best thing. But there is a slight risk that they'd start delving into your tax history including your current wealth to date.

IMHO it depends a bit on exactly where your place of birth was in the US. If your current passport shows e.g. Los Angeles or Chicago, or somewhere equally obviously in the US, the risk of having a problem is higher than if it says somewhere more obscure or ambiguous like Smalltown or Durham.
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christmasoompa

You have to file tax returns, but you shouldn't have to pay any tax on income to the US, as I believe it has tax treaties in place with the UK & Canada.

But I'll move this to the US forums where the kind folks there will no doubt help you out.

penguinsix

Hi,

There are actually quite a few issues you need to sort out and traveling on the US passport is probably the easiest. While you can probably just let that one time slide under the radar, the other issues are more thorny and carry more severe penalties.

First and foremost, the issue of taxes. You are required to file a tax return annually on all income earned no matter where in the world you are currently residing. While the first $92,000 or so of income in excluded, along with some housing deductions, and there are treaties for double taxation between the US and Canada, there is still a 'hole' in your records regarding past tax filings. EVEN IF YOU WISH TO RENOUNCE you will be hit with a form 8854, requiring you to state that your past filings are uptodate.

Second, there is an issue of foreign bank accounts. If at any time during the year the cumulative total of your foreign bank accounts was greater than $10,000 USD (even if only for a day) you need to file an FBAR report for the purposes of money laundering. If your assets are above $250,000 (or so--varies), then you have to deal with a FATCA filing, which is brand new and a tad complicated.

Third, if you own a percentage of a foreign company & our a director of that company (or some other criteria) than you need to file a disclosure saying that you own a foreign company. Again another tax form that's way too complicated and extremely annoying.

Fourth, if you are a male you were required to register for selective service ('the draft') making you eligible for military service with the US (eventhough there hasn't been a draft in over 40 years or so).

Basically, if you don't intend to utilize your US citizenship, your choices are to fall into compliance with these rules or renounce your US citizenship (which, however, might actually require you to fall into compliance before you complete the renounciation).

My advice would be to seek some professional guidance from a US tax / immigration specialist.

Good luck.

Cook_County

This article discusses the seven options you currently have from a tax perspective: http://www.taxation.co.uk/taxation/A...nk-them-filing

ian-mstm

Yes, the US is a bit odd in this respect.


Perhaps. The obligation is to file a US tax return each year... not necessarily to actually pay US tax each year. There are several tax treaties in place that help you to avoid paying double taxes, and these suffice for most.


Whether or not you ever claimed US citizenship is irrelevant... the fact remains that you are a USC by virtue of the 14th Amendment to the US Constitution. That being the case, you are bound by US law in this regard. One of those laws obligates you to enter the US using a US passport.

Renouncing US citizenship to avoid taxes brings with it some hefty fines... but it can be done. Note also that you are obligated to declare any foreign accounts (read = non-US) with an aggregate total of over $10,000. This includes your Canadian and UK pensions, stocks, bonds, retirement accounts, etc.

As King Henry noted in Lion in Winter... "It's a tangle".

Ian

nun

It's a gamble if you try to enter the US on a non-US passport. If the immigration agent sees that you were born in the US and knows his/her job they will deny you entrance. That is probably annoying, but the tax issues are a lot more important.

You could just ignore it and things will probably be ok as long as you don't go looking for trouble, but that would worry me.

The other option is to come into compliance and then keep filing US taxes or renounce US citizenship. Tax is the least of the issues here as there is probably no US tax due because of tax treaties and IRS code. So file a few years of taxes showing zero tax due and there will be no penalties or fines. However, the nasty issues are the large fines associated with delinquent FBARs or 8938s.

Here is an article that discusses the new tax amnesty for low risk non-US residents. It might be appropriate for you.

http://www.forbes.com/sites/robertwo...-for-everyone/

I would take some professional advice before you proceed, but getting squared away for US tax is the thing I'd do and then renounce if I had no desire to live in the US.

nun

If you are compliant with US taxation prior to renouncing and pay any exit tax due there is no issue.

holly_1948

If you are just an ordinary working person the advice to let sleeping dogs lie is probably best. Since you probably don't actually owe Uncle Sam any unpaid taxes (you might owe penalties for not filing these "zero" tax returns) they are highly unlikely to go after you as long as you don't try to live or conduct business in the US.
Nonetheless it is probably wise to avoid even passing through the US and minimise any visits or eliminate going there at all. Believe or not, there are people who are US Citizens and don't even know it. My own mother (born in 1921) was one of them; we only found out she was a USC after she died, she never knew (which was probably just as well).

On the other hand, if you are seriously wealthy or plan to marry an American then you absolutely must hire a tax lawyer.

nun

There is no penalty or interest for not filing taxes if you don't owe anything. Fines and interest are assessed on the tax due.....zero tax (or refund) due means zero penalties.

rpjs

There is the example of Boris Johnson, Mayor of London, who was born in NYC and was (so he claimed) unaware that he was a US citizen until a CBP officer noticed the birthplace in his UK passport on a visit to the US.

Since Boris regards his £250,000 fee for writing a column in the Torygraph as "chicken-feed" I'd say it would have been pretty likely the IRS could have subjected him to a world of pain, but by all accounts he was allowed to renounce his USC without any issues because he'd allegedly been unaware of it and never claimed any privileges from it.

ian-mstm

No, they won't. There may be a fine for not using a US passport, but US citizens have the right to enter the US... and a CBP officer does not have the authority to infringe on that right simply because he's not using a US passport.

Ian

Cook_County

Boris has never renounced. He is a US citizen still. Indeed not only have I asked him about this myself in earoy 2010; but he wrote in August 2012 in the Spectator that he is still proud to be American.

His name has still to appear in the quarterly list of expatriates.