To NOT want my children to get US passports?

(139 Posts)
Daffodilly Sat 16-Feb-13 20:45:25

DH is American (by birth) but also has British citizenship. We met, live and had our children in UK. No current plans to move to US.

Children are entitled to get US passports as well as UK ones. But my understanding is that at same time they are issued with a social security number too and being US citizens has implications for future tax situation. US citizens are taxed on worldwide income, regardless of where they live.

I feel this could be a huge burden to place on our children when they may never choose to live or work in US. DH places significant value on US citizenship for them.

Ooh I didn't know you were American Kritiq smile

I would say many many American expats do not bother with US taxes, with no repercussions

When you add in all the tax deductions and legal tax avoidance you can do -- really, you need to be making a LOT of money before you would have to pay extra taxes.

I just think the more globalised the world gets, the better off you are having more passports. It just gives you more options.

SavoirFaire Sat 16-Feb-13 23:56:42

You also need to be aware of the new FATCA regulations. The DCs US (dual) citizenship will impact their UK bank accounts very soon. Certainly worth seeking additional advice. here for info.

So now you have to declare bank accounts with more than $50,000 in them.

I seriously cannot get worked up about rich people having to do more paperwork (sorry).

Your average dual citizen is not really going to be screwed

You have to declare bank account with over $10,000 in. Over $50,000 is a whole new ballgame.
$10,000 isn't that much in pounds.
http://taxes.about.com/od/taxglossary/g/FBAR.htm

lisianthus Sun 17-Feb-13 02:02:38

Get advice, but my understanding(from working with a lot of Americans in the UK) is that it is a very bad idea unless your children intend to return to work and live in the US. It is not so much the requirement to pay taxes, as all of the paperwork it entails. I also know a few people who have been in the position of your children and they grew to adulthood in the UK and then found out that they should have been filing a tax return in the US as well, but hadn't because they weren't aware that they had to. Cue lots of negotiations with an unimpressed IRS- a body you donot want to be on the wrong side of - to sort it all out.

Give your kids the choice when they are of an age to make an informed decision. Sure, having the chance to work or go to Uni in the US would be great, but if they don't actually want to do those things, why saddle them with the drawbacks of US citizenship?

kickassangel Sun 17-Feb-13 02:23:32

But if their dad is an American then they are citizens as well unless they actively avoid it. It's something they have to opt out of, not join up if they want.

anonymosity Sun 17-Feb-13 02:36:51

I don't see what the "drawbacks" of US citizenship are. I know that when we are eligible for it, we'll apply (we have greencards which allow residence and work). We live in the USA and it will mean at the very least with citizenship a) we can vote and b) if when we are very, very old we need medicaid, we can have it.

Tasmania Sun 17-Feb-13 02:42:59

I would not denounce their citizenships just yet, for two reasons:

(1) you currently only get taxed above a certain amount,

(2) you don't know what will happen to the UK; the US is a much bigger country (cheaper houses, etc.), so I wouldn't want to take that away from my dc, if I had the choice.

RichManPoorManBeggarmanThief Sun 17-Feb-13 03:06:55

The tax thing becomes an issue if you are a US passport holder living in a country with lower income taxes than the US. This is because Us citizens, resident outside the US are taxed on their worldwide income. Most other country's non- residents are only taxed on the income they make in the country it arises in.

Eg I am a uk citizen resident in Hong Kong. I don't have to pay uk taxes on my salary from my job in Hong Kong but if I was American then my Hong Kong salary would be taxable in the US. They do take account of taxes already paid in HK but as the tax rate in HK is 15%, most Americans still have to pay more to the US. Even worse if you live somewhere that's tax free as your salary and cost of living basically reflects that but you're still having to pay US taxes on it

A lot of Americans in HK with dual nationality are renouncing their us citizenship at the moment for exactly this reason.

Mimishimi Sun 17-Feb-13 03:25:53

You are right to be worried. Our daughter is a dual US/Australian citizen and we have been informed by DH's tax advisor this year that she is expected to file a U.S tax return yearly once she reaches a certain age. She might also have to pay tax on any earnings even if she has not earned it in the US. Even if her income is quite ordinary. Very scary. The place is run by criminals which actually why we left despite living there for years. We are also thinking of getting her to renounce her citizenship.

anonymosity Sun 17-Feb-13 04:09:04

I don't see how or why filling in a tax return is scary? especially when there are accountants who can advise you and do it for you...confused

mathanxiety Sun 17-Feb-13 05:28:13

Requirements for claiming citizenship.

Tax. If your DH files a US tax return he will not be able to claim your child as a dependent unless the child has a SSN.

Tax exclusions

Credit or deduction?

DD1 has both an American passport and an Irish one. She uses the American passport leaving and entering the US but the Irish one within Europe and elsewhere. She works in the US and has paid taxes there (I did her tax returns until last year) since age 16 when she was legally able to work. (Children don't have to file tax returns on the contents of their piggy banks.) Normally the US tax liability is the difference between the foreign tax requirement and the US tax requirement and only if the foreign taxes are lower than the US taxes.

Doing taxes isn't scary. Even paying taxes isn't necessarily scary. The IRS 'help' site is incredibly wordy and there are a gazillion forms, but with enough time and all your documentation and a calculator it is possible to roll up your sleeves and get it done. ANd there are accountants if it turns out to be too complicated.

Reporting a foreign bank account is not the same as paying taxes on what's in it. You are taxed on the interest in a bank account, and not the money in the account, because taxing you on your savings in the bank is double taxation (assuming you paid taxes on it when it was income). Taxing income from those savings is reasonable. Any foreign taxes paid on your interest income may qualify for US tax credits.

I would keep the citizenship as educational opportunities in the US are great and financial aid for citizens is good. Summer and term-time work for American citizen students is unrestricted. It can work out cheaper to go to a really good American university than a British one. Plus you can go and work (and be taxed) there. It is very handy to have an option besides staying in Britain and hoping things don't go belly up; unless you are fluent in a European language (which is the alternative option) I think it's shortsighted to have all your eggs in one basket when it comes to career opportunities.

NumericalMum Sun 17-Feb-13 05:46:40

Our DC has dual nationality (not US) and the main reason we got it was because my grandmother didn't get British citizenship for my dad meaning when he was older he had no right to claim it due to a change in laws. He eventually got a passport but we had to get visas to work here and it was such a pain. My DC can give up her passport if she wants one day but for now it provides extra security and I would hate her to ask us why we didn't bother one day.

If your DH files a US tax return he will not be able to claim your child as a dependent unless the child has a SSN.

Not true when we moved here, DS had an ITIN before he had a SSN and was claimed as a dependant. It may have changed since DS' citizenship was sorted out.

I am a DN and never paid tax to the U.S. until we moved here. My sister is also dual and the IRS never bugged her until she decided to move here and then they cared and wanted 7 years of records.

If you ever go to the U.S. they will need U.S. passports, it is a big no-no to not have them and enter on a foreign passport.

I'm really glad I'm a dual national. It was important to me to live here as an adult so I could experience my other culture.

But if their dad is an American then they are citizens as well unless they actively avoid it. It's something they have to opt out of, not join up if they want.

Agreed. They are already citizens unless you denounce it and I think the kid should get to choose that when they are an adult.

well so long as dad has met the resident requirements that is.

Cyclebump Sun 17-Feb-13 07:29:09

I was born in the US and was not allowed to leave the country at two weeks old without a US passport hmm

If you are a US citizen you cannot travel to or within the US without a US passport.

I have never been chased fir taxes despite having a social security number (I've never lived in the US or earned a big wage).

And despite what someone else has posted, I have always used the US citizens queue when travelling to the US (JFK included) and once took three hours less to get through than my non-US citizen siblings.

It's a faff renewing my US passport (I go to the embassy), but it's once every 10 years so it's git more pros than cons.

GingerPCatt Sun 17-Feb-13 07:39:56

We got DS's American passport in August. If the ever travel to the US they have to do it on an American passport. As I recall, the social security card was a different form so see if you really have to do that as well. We did both since I want DS to have choices about where he goes to university or where he lives when he's older. I'm not worried about the tax thing at the mo. When he's an adult and working he can decide what's best for himself and besides, who know what taxes will be like in 18 years time.

OlyRoller Sun 17-Feb-13 08:04:20

Americans most certainly do NOT need a US passport to travel within the US. Travel between states is unrestricted.

Acinonyx Sun 17-Feb-13 08:35:55

Dd has UK and US passports. DD and dh must travel to the US on their US passports but I go through customs with them as I am dd's mother - I don't have to go separately (I did before I had dd).

Dh earns over the limit and has done for a long time. He files a return every year but he has never had to pay anything. He does claim for dd as a dependent.

theoriginalandbestrookie Sun 17-Feb-13 08:58:26

I'm an adult with dual nationality. Never filled in a US tax return in my life as I haven't worked there.

Personally I'm pleased I have the option of both countries as you don't know whats going to happen in the future in the UK or the US.

As far as I am aware my only obligation to keep my US passport is to return atleast once every 10 years using it. So at Easter we are going to Disney ( what a hardship !)

Knowsabitabouteducation Sun 17-Feb-13 10:11:41

To those who say they haven't filed a US tax return, you do realise you are breaking the law if you earn over £8000?

Just because you haven't been caught doesn't make it right.

The IRS won't chase you because very few British residents pay a penny. There isn't anything in it for the as penalties are based on taxes owed.

However, If you ever want "immigration benefits" (ie to sponsor family members to live there), you have to provide three years of tax returns. Do you really want to scramble around trying to file back taxes?

If you finances are fairly simple - job, mortgage, bank interest - it is a half-hour job once a year. Anything more complex, and you can use Turbotax.

lljkk Sun 17-Feb-13 10:14:00

Apologies I don't feel like reading whole thread closely. I am ex-pat USA having lived in UK 21 yrs.

If your DC don't travel into USA on US passports when they are entitled to US citizenship, then they could end up being forced to forfeit US citizenship later. You may be depriving them of an option. What's more, they could be held guilty of a criminal charge (go to jail penalties) for travelling into the USA without US passport. They have to formally renounce their US citizenship to be completely sure of avoiding that risk.

The rules about entitlement to citizenship for children of Americans born abroad are somewhat complicated. You need to review closely.

It is a faff going to register births at American consulate. Be sure to get the documents correctly notarised.

Under American system you only have to file tax return if you owe (whereas in Britain you have to declare in Inland Revenue all earned income even if far below the tax threshold, how many people knew that?). Anyway, I haven't filed with IRS for a decade because I didn't owe anything, not likely to in near future. Helpful in case of sudden tax-liable inheritance, though, to document that I didn't owe tax in many previous years.

lljkk Sun 17-Feb-13 10:19:39

Is the tax threshold as low as £8000, so about $12,000, Knowsabit? I thought even the personal allowance was around $14k, now. And the foreign earned income exclusion was nearer to $70k. I realise investments are taxed differently, but "fortunately" I'm not blessed with lots of income from those either, lol.

Does that Turbotax programme work well for people living outside USA, and can it cover individual state tax returns (even better)? Whenever I looked into this previously there was NO good home software package for non-resident US tax payers. I gave up & did it all by hand, reckoned that any fines I might ever be levied with would be less than the expensive software package costs that needed updating annually and wasn't a guarantee of getting it right, anyway. It was a pure statistical risk-tradeoff decision. Hopefully this year my earned income will exceed £8k (but not $70k, for sure). I'll have to get my head around it all again.

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