# US Tax - Dual Citizen in the UK



## green99

Hello all,

I've been reading up about my potential requirements after coming across an article on FACTA in the UK press. My research has led me here and I've got a massive shock at what it looks like I'll have to do to become US tax compliant. Any guidance around this would be really appreciated, given my current circumstances. I understand nobody here is able to give tax advise (and my next step should be to consult a tax expert) but any of those with previous experience who would be able to shed light on the process / point me in the right direction would be incredibly helpful.

A bit of background.

I'm Irish by birth and found out at the age of 18 that my father was actually a US citizen, but had lost all his details. We proceed to write a bunch of letters to various agencies and 3 years later I traveled to the embassy in Dublin, and sweared an oath. A couple of months later a passport comes in the mail.

Outside of that I have no connection to the US, no accounts, social security number, nothing. The only link is my passport.

i then proceeded to move to the UK where I have been working for the previous 2 years straight from university. My bank account has passed the USD10k threshold on both those periods at one point in the year, but not the USD50k threshold.

I have a number of questions:

Do I have to have to file US tax returns?

Do I have to file an FBAR?

Do I need an SSN to do all / any of the above?

What about the year for which I haven't filed any of the above?

Should I have the expectation that I will have to pay tax. If yes should I expect it to be significant (ie > USD1000). Again I know this is an impossible question to answer, but any type of ballpark answer or previous experience is hugely valuable.

I know this is a hugely personal decision, but If you were in my shoes would you just renounce citizenship and be done with it? Or am I getting a little ahead of myself - are the reporting requirements less onerous that I'm led to believe?

I don't have the intention of ever living or working in the US, but things of course can change and I love knowing that I could do so if I wanted to - I'm still in my mid twenties afterall - but this reporting requirement seems utterly insane.

Finally do you have any resources where I could read more about these requirements - given my circumstances?

Thanks very much for taking the time to read, any thoughts on any of the above are much appreciated.


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## Nononymous

green99 said:


> I'm Irish by birth and found out at the age of 18 that my father was actually a US citizen, but had lost all his details. We proceed to write a bunch of letters to various agencies and 3 years later I traveled to the embassy in Dublin, and sweared an oath. A couple of months later a passport comes in the mail.


Oops! Bad call, dude. Perhaps the embassy should have pointed out the fine print concerning taxes. Though, strictly speaking, the US has always considered you a citizen from birth, only it didn't know you existed until you applied for a passport.



> Do I have to have to file US tax returns?


Technically yes, if you make more than a rather small amount of income.



> Do I have to file an FBAR?


Technically yes, if your account balances exceeded $10,000.



> Do I need an SSN to do all / any of the above?


Yes.



> What about the year for which I haven't filed any of the above?


If you wished to become fully compliant, you would be advised to enter the streamlined program and file three previous tax returns and five previous FBARs (more or less - you can look up the exact details).



> Should I have the expectation that I will have to pay tax. If yes should I expect it to be significant (ie > USD1000). Again I know this is an impossible question to answer, but any type of ballpark answer or previous experience is hugely valuable.


If you have a normal sort of income and pay tax in the UK, very unlikely that you'd ever owe the US so much as one cent.



> I know this is a hugely personal decision, but If you were in my shoes would you just renounce citizenship and be done with it? Or am I getting a little ahead of myself - are the reporting requirements less onerous that I'm led to believe?


In your shoes I would do absolutely nothing. The State Department has a record of you applying for a passport; the IRS more than likely does not know that you exist or meet the threshold for filing, you don't have an SSN, and most important of all, you don't have a US birthplace so banks in the UK won't know that you're American (unless you do something very stupid and tell them) so there will be no FATCA reporting to worry about. 

That being said, reporting probably isn't that onerous, at least at first, but once you're on the IRS radar, you're on the radar - no going back. Renouncing will cost you $2350, plus five years of tax filing to properly exit the system - though again, likely no money actually owed.



> I don't have the intention of ever living or working in the US, but things of course can change and I love knowing that I could do so if I wanted to - I'm still in my mid twenties afterall - but this reporting requirement seems utterly insane.


It is insane. It's bat**** crazy. In your position I personally would stay the hell off the radar - do nothing. Highly doubtful you'd ever see a letter from the IRS based on a passport application three years ago. If in the future you want to move the US, you can regularize your tax situation then. I'd keep my eye on the situation though, as the deals for "accidental Americans" such as yourself may get better.



> Finally do you have any resources where I could read more about these requirements - given my circumstances?


Start with IRS Publication 54, and look around here.


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## BBCWatcher

If you haven't reached your 26th birthday you also must register with U.S. Selective Service if you haven't already (if you're male).

I take a different view in the circumstances. Unemployment in Ireland is approximately double that of the U.S., so you're in the U.K. earning money. You speak English and by default have reasonably strong cultural and professional affinity with the U.S. if you need it. If Europe goes pear shaped -- it has before, and it's making a strong effort to do so again -- having that second passport is darn handy. If the price is zero plus some annual paperwork, that's not a bad deal in my view.


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## Bevdeforges

I side with Nononymous. But in any event, before you can do any of the filings, you'll need to apply for a US social security card/number, and that is not a trivial process as an adult.

As Nononymous says, the chances are you owe exactly $0 in back taxes. Earned income is excluded under about $100,000 each year (or you can take tax credits for what you've paid in your home country, if you prefer, but the FEIE exclusion is the fast and dirty way to assure your tax bill is always $0). And interest on bank accounts and such is normally shielded from tax by about $10,000 in exemptions and deductions you're alloted as part of the process.

To be honest, you don't actually need to renounce at this point. There are LOTS of US citizens living overseas who don't file (and who don't owe anything, either) and they are very unlikely to draw much attention even if they choose to visit or move to the US some time in the future.

Just for the record, you only have to file tax returns for any year in which your worldwide income exceeds the filing threshold - which, for a single guy is about $10,000. And, you only need to file FBARs for any year where your total "foreign" (i.e. non US) accounts exceed the $10,000 mark.

If you want to comply with the tax filing thing, you may not need to deal with the Streamlined Compliance procedure at all, just file the documents for the years where you met the filing requirements. With no taxes due, there's no penalty (and so far, at least, they haven't bothered to go after late filers of the FBARs with only "trivial" sums in their bank accounts).

However, if you want to go the compliance route, the first thing you'll need to do is to apply for a US Social Security number. Social Security Numbers | Embassy of the United States and scroll down to Question 2.
Cheers,
Bev


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## green99

This has been incredibly helpful folks, thanks very much for the detailed replies.

I have a couple of more questions:

If in 10 years time I decide to move to the US, given all other things are equal and the tax situation doesn't change, how bad / onerous is it to be become tax compliant? I believe I have to enter the "streamlined program", is that a pretty standard process or is there a possibility of having to deal with civil fines at all?

Has anyone come across resources / or links here of people who have gone through the process?

Again sorry for the basic question but is there a link where I can read about filling back taxes, as opposed to going through the Streamlined process as mentioned by Bevdeforges?

I will earn over USD100k this year, so it looks like I'm going to breach the foreign earned income tax credit. If that happens, I assume it becomes a more complicated process. Do I have to start calculating how much tax I make in the UK, for the IRS to then check that to ensure net net I would not owe any taxes?

So looking through everything carefully, I think I'm going to hold fire for now, with a view to rigorously keep record of any financial accounts I do set up. I think I'll review in a year or so when I'm in a better position financially to deal with all the crap associated with this. Even then I'll only have 3 years of accounts for which I have breached the threshold, so I'm not in bad shape.

Also to BBCWatcher, you're right its a free option for now but only just, and I'm going to have to seriously consider my options, but not right now. I don't think I'm going to be in a materially worse position this time next year regarding all of this, and it will give me more time to read all this legislation so I'm in a better position to make an informed decision.


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## BBCWatcher

green99 said:


> If in 10 years time I decide to move to the US...


Or visit the United States at any time (even in transit).



> ....given all other things are equal and the tax situation doesn't change, how bad / onerous is it to be become tax compliant? I believe I have to enter the "streamlined program", is that a pretty standard process or is there a possibility of having to deal with civil fines at all?


The overseas Streamlined Program is an IRS amnesty program that can end (or be made less attractive) at any time. I can't imagine how it could be any better than it is now since it's such a great deal.



> I will earn over USD100k this year, so it looks like I'm going to breach the foreign earned income tax credit. If that happens, I assume it becomes a more complicated process. Do I have to start calculating how much tax I make in the UK, for the IRS to then check that to ensure net net I would not owe any taxes?


It's not much more complicated. First of all there's free tax preparation software, e.g. TaxAct, which works quite well. The tax prep software (online or offline) asks you questions, interview-style, then fills out the forms for you.

The best estimate I've come across is that only about 6% of U.S. persons living overseas owe any U.S. tax whatsoever. That's roughly 400,000 Americans, and you're almost certainly not one of them.

You have a couple paths in a tax filing. One is you can take the Foreign Earned Income Exclusion and Foreign Housing Exclusion, and that'll shield $100K+ in earned income from U.S. tax. Above those exclusions you'd then take the Foreign Tax Credit. If your U.K. tax rate on those next dollars (converted from pounds) is equal to or higher than your hypothetical U.S. tax rate -- it will be -- then that wipes out your remaining tax liability on your earned income. Another approach is you can skip the exclusions and take only the Foreign Tax Credit. Either way, any excess FTCs are bankable and can be "spent" up to 10 years into the future to offset future possible U.S. tax on that same category of income.

For your passive income (interest, dividends, capital gains, etc.) you have the FTC available plus your personal exemption and deductions (usually the standard deduction) -- a blanket $10K or so that you can shield even without FTCs on that income.

On top of all that, there's a tax treaty that may offer some benefits. And occasionally -- tax years 2009 and 2010, as examples -- you get free money from the IRS because you're American, you have a pulse, and you have some income from work (that example). If you file, that is.

Welcome to "Club 94%," I'd say. 

Now, the penalty for non-filing is zero _if you genuinely owe zero tax_. However, if you don't file you don't start the clock on certain statute of limitations, so it's a bit risky.

The separate financial disclosure forms -- FinCEN Form 114 ("FBAR") and IRS Form 3520 (or 3520-A), if/as applicable -- are different. Failure to file those is a pure, straight-up penalty -- dead simple stuff to prosecute if desired, which is a major reason they exist. If the failure to file (or file truthfully) was willful, prison time is among the available weapons. (It's willful after you read this paragraph and don't file, if somebody can prove that in court assuming inquiry and prosecution.) Could you get away with not filing those forms? Maybe, probably, can't guarantee it. The first "naked" FBAR prosecution -- a prosecution solely for that offense as a standalone matter -- happened just a couple years ago, and it was a successful prosecution. If pushed, I think I'd say that the danger isn't "high" yet, but it's growing. It's at least more dangerous in your particular circumstances not to file the financial disclosure(s) than not to file tax returns. Genuinely zero-tax-owed tax returns we can at least quibble about.


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## Nononymous

BBCWatcher said:


> Or visit the United States at any time (even in transit).


Evidence? No reports here (or elsewhere last time I looked) of tax status being questioned on entry into the country. (For a regular expat non-filer - this is of course not the same thing as the fool who returned when there were already proceedings against him.)

The one obvious advice I would repeat to the OP is, do not under any circumstances mention your US citizenship to any financial institution in the UK. You want to stay well away from FATCA reporting.

Whether you choose to become tax compliant is a of course a personal decision, for which the one key factor would be the probability of your one day deciding to work in the US.


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## Bevdeforges

OK - you are the one who needs to figure out what you are willing and/or able to do and how likely you are to require that US passport now or in the future.

As far as the streamlined compliance program goes... it has only been "codified" in the present form for the last couple of years. But for at least a decade or two before that, the official method of "getting straight with the IRS" was almost identical - file current year plus three years back, and if you didn't owe anything (or more than a few hundred dollars), you were considered "forgiven." (They only really started getting picky about FBARs since the FATCA thing came out in 2010 or so.) Some of the international IRS offices (like the one in France) even promoted this approach on their websites - and it appeared briefly on the main IRS website (irs.gov) for a time. However, since the Streamlined Compliance Program came out, the IRS official line has changed.

But as BBCWatcher says, they could theoretically pull the Streamlined program at any time, just cause they felt like being nasty. In practice, they normally won't bother pursuing any case, even of failure to file, unless there is a certain minimum amount of back taxes to be collected. And, fines and penalties have always been a function of the amounts owed. So, if you owe nothing, you can usually come clean without having to pay any fines. 

In practice, they haven't really gone after anyone for failure to file FBARs unless there are significant back taxes at stake (usually related to the accounts that should have been disclosed on the FBARs).



> Do I have to start calculating how much tax I make in the UK, for the IRS to then check that to ensure net net I would not owe any taxes?


How much you owe isn't really in question. The US tax system is cash based, so all you need to track is how much you have paid during a given calendar year. (NOT the UK tax year.) Just be careful as the FTC only allows you to offset "income taxes" - not any sort of social insurance, nor any other sort of taxes paid. And even if you take the FEIE to exclude the first $100,000 of earned income (salary only), there is a way to use the FTC to offset taxes on the "unearned" income or the salary income in excess of the FEIE limit. It does complicate your forms a bit but at those income levels, it's probably well worth learning the drill.

If you want to learn about what you may be getting yourself into, download Publication 17 from the IRS website: Publication 17, Your Federal Income Tax 
Cheers,
Bev


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## Nononymous

As I understand it, the sore points you'll likely to have in the future with becoming tax compliant are not so much to do with income - you will offset any US taxes owing with UK taxes paid - but rather goofy rules around certain kinds of investments (if not money owed, then scary paperwork) or, depending on the state the property market, you could eventually run into a Boris Johnson situation where you owed capital gains tax on the sale of a primary residence. 

The idea that a person born in Ireland and working in the UK should ever ship money off to a country where he or or she has never lived, because of one parent's citizenship, is of course completely perverse. (Welcome to the gift of US citizenship.) It's not particularly likely, at least not right away, but if you choose to become compliant, that's a situation you could potentially find yourself in.


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## green99

Thanks again for the replies, looks like I've plenty of reading to do before I make any final decision, it is starting to make more sense where I stand as of now. I see now the real issue in the future is regarding mortgages / share accounts etc. As far as I'm concerned, I'm Irish but happen to have a US passport, and I have yet to use it in any way shape or form - I don't even know if I would now travel on it to the US if it came up. I have certainly never disclosed this information to any financial institution.


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## Nononymous

green99 said:


> Thanks again for the replies, looks like I've plenty of reading to do before I make any final decision, it is starting to make more sense where I stand as of now. I see now the real issue in the future is regarding mortgages / share accounts etc. As far as I'm concerned, I'm Irish but happen to have a US passport, and I have yet to use it in any way shape or form - I don't even know if I would now travel on it to the US if it came up. I have certainly never disclosed this information to any financial institution.


Another area where US tax compliance could make life challenging is if you started your own company in the UK, even to work as a freelancer. See other threads on that fun subject.

For now, you have all the time in the world - I would do nothing but stay abreast of developments and consider your options going forward. (And continue keeping your mouth shut any time you walk into a bank.)

There's no evidence that tax status is ever checked at the border, should you travel to the US. That could of course change in the future. 

As a US citizen you are in fact legally required to enter the US with your US passport, but since you don't have a US birthplace are less likely to have problems using your Irish passport. In this past this has not been regularly enforced, though they seem to be taking it more seriously now. I'm Canadian-US dual and only once did I ever have a problem entering the US on my Canadian passport showing a US birthplace. At present, I would not be too concerned about travel to the US, regardless of which passport you use. Moving there and becoming a taxpayer is another matter.


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## CdnAllTheWay

You have much research and thinking to do. There is a recent US proposal that could be helpful to you.

Google "Obama FY2016 budget proposes limited relief for accidental duals"


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## Nononymous

CdnAllTheWay said:


> You have much research and thinking to do. There is a recent US proposal that could be helpful to you.
> 
> Google "Obama FY2016 budget proposes limited relief for accidental duals"


Even if that proposal passed, the OP might not gain much relief because he/she actively sought out a US passport. But the fact that the proposal even exists is an encouraging sign that someone, somewhere recognizes that accidentals should have a less painful path to ditching citizenship and its tax obligations.


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## BBCWatcher

Nononymous said:


> As a US citizen you are in fact legally required to enter the US with your US passport, but since you don't have a US birthplace are less likely to have problems using your Irish passport.


This is quite naive, at least as a future-looking matter. If the Canadians can figure out at their border which Americans have DUIs (they do), the Americans can figure out that Joseph Brian McCarthy born in Cork on August 3, 1982, is most probably the same person as Joseph Brian McCarthy born in Cork on August 3, 1982, to whom they issued an American passport at the U.S. Embassy in Dublin.

Please, give them some credit. 

Plus there's the fact you get to stand in longer immigration lines and pay ESTA fees for the privilege.


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## Nononymous

Sure, it's possible. But they don't seem to be super organized. 

I travel on my Canadian, with a US birthplace, after having had multiple US passports. Nothing happens. There's no flag. The only time it came up was when I was getting the BS line about needing a work visa for three days of meetings, I complained that I'd done this lots of times without grief, and the customs guy eventually went "oh, wait, you have a US birthplace, are you a US citizen?" I was let in, but I got a lecture too. After that I continued using my Canadian passport with no issues whatsoever.

They might get their act together in the future, but it hasn't happened yet.


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## BBCWatcher

I'm pretty sure the agent knows you're using the wrong passport but lets it slide. I wouldn't count on that persisting forever.

Canadians also don't have ESTA complications, which is a different matter (and yet another "choke point"). They also generally don't have pre-transmission of passenger manifests since they are (usually) precleared from Canada. You cannot really translate Canadian experiences to other nationalities' experiences here.

As another matter, I would have difficulty maintaining employment with my particular employer if I were not tax, financial filing, immigration... compliant. They insist on it, and I'm sure they're not the only employer to do so. They (understandably) don't want employees with "funny business" going on. It hurts the employer's reputation at the very least. But it also makes it difficult to move employees around, and that's contrary to business interests, too. ("Oh, sorry, I can't move _there_....") Obviously it depends on what profession you practice, but some people (like me) face this reality.


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## Nononymous

Certainly, there's pros and cons. It's easy for me to cross the border on a Canadian passport when I've got the US version in my back pocket. Why don't I use the US? Data gathering for this forum and others. So I can let others know if and when they take the rule seriously.

In the OP's case I might use the US passport to enter the US, it's probably just that much easier. (For Canada, not much difference.) I wouldn't worry about tax compliance though. There is, as yet, no evidence that tax status is ever queried at the border. Given the change in the passport form over the past few years (the declaration that you're up to date on taxes disappeared, replaced by the declaration that you truthfully give your SSN if you have one) suggests that the State Department doesn't put cooperation with the IRS high on its priority list, so it may be quite unlikely that the IRS will send "by the way, should you be filing taxes?" letters to everyone who's applied for a passport (depends on the State Department forwarding the SSNs, and the IRS doing something with them).

Of course this could all change in the future. Who knows?

And yes, there are jobs that might have such requirements. I certainly had some fun discussions with my employer, telling them that I'm a US citizen, so I don't need any paperwork to travel south, but I'd rather avoid the place if possible.


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## BBCWatcher

We're digressing quite a bit here, but let me try again. 

Nononymous, your "experimentation" with presenting a Canadian passport to U.S. CBP is perhaps interesting, but one can only draw conclusions from those experiments if one is (also) Canadian. If one is a citizen of, say, Ireland and the U.S., your experience is not all that relevant. There are essentially three broad categories of foreigners attempting to enter the U.S. Canadians are among the very few most privileged. Irish passport holders are in the middle category, along with Italians, French, and several others. Then there's everyone else who must apply for a visa.

You don't need to apply for ESTA permission. Irish passport holders do -- and they have to pay for the privilege. (I'd have to check, but applying for ESTA permission gives you another possible opportunity to commit a felony, perjury most likely.) Your experiment would never be able to detect whether the U.S. erects a barrier at the ESTA application/approval stage, or in its aftermath, because you never experience ESTA. Likewise, it depends on your travel pattern. Canada to U.S. travel is very different, involving very different data flows, than travel from, say, Paris to New York. The latter involves more extensive passenger manifest data sharing and U.S. processing of that data prior to landing. If you're driving from Windsor to Detroit, for example, you're just a "pop up."

So while your illegal experimentation may be very interesting to some with U.S. and _Canadian_ citizenship, it isn't actually very _useful_ to those with U.S. and some other citizenship.


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## Bevdeforges

Based on recent experience (not myself - of others I know), the only folks stopped and "harassed" (i.e. "lectured") on entry to the US for daring to enter on a non-US passport have been those with US birthplaces. For the moment, there is no reason to believe they are checking their data base of all US citizens born elsewhere in the world (if they even have such a data base). The likelihood of "false positives" is just too strong and US government computer systems are not exactly the latest and greatest, plus the agencies don't actually share information from one agency to the next to any noticeable extent.

There is also little or no chance of being stopped on entry for failure to file or the absence of tax filings of any sort, given that there are many legitimate reasons US citizens may not have filed in a given year - insufficient income, legitimate extensions, etc. Now, if the IRS has put out a warrant for your arrest due to tax evasion, you'd know about it and probably just avoid traveling to or through the US in any event. (At a minimum, you would have received a number of "nasty letters" from the IRS to tip you off that they were on to you.)

The IRS has long relied on fear and intimidation in order to "enforce" their little corner of the legal universe. (I remember our professor making this point on the first day of my tax class in business school.) There are actually US residents who don't file tax returns - some legitimate, some not so much - and whether and when the IRS gets around to dealing with them depends on lots of factors, including how much they actually owe, all fines and penalties included. There just aren't sufficient resources to pursue everyone who "ought" to be filing, even if they owe little or nothing. 
Cheers,
Bev


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## BBCWatcher

For the record, if you are a citizen of the United States and an ESTA visa waiver country, yes, you (probably) have to commit a felony to get ESTA travel permission. The ESTA form asks this question: "Are you a citizen of any other country?" Select No, and (assuming you know your own citizenships) you're lying. Select Yes, and "United States (USA)" is one of the available choices, (in)conveniently.

Ah, but what if you are a tri-national? Couldn't you just provide your two non-U.S. citizenships? Sorry, they thought of that. When you select your second citizenship, another box appears just below it. And there you have to specify your third (and subsequent, if applicable) citizenships.

Selecting "United States (USA)" as your second (or Nth) citizenship either halts the ESTA application in its tracks or, after you pay, results in a denial. Not sure which since I can't test that, but it'll be one or the other.

There's a catch-all "any materially false, fictitious, or fraudulent statement or representation" offense: 18 U.S. Code § 1001. The advertised penalty is a fine (not sure how much), up to 5 years in prison, or both. So, pretty hefty stuff in the U.S. criminal code there. For the record.

I'm not going to be trying this experiment.


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