# Claiming ACTC for non-citizen child



## Alltimegreat1 (Feb 25, 2015)

The father of one of my son's friends recently revealed that he's a US citizen, although he's never lived in the US. The child's mother has only German citizenship.

He claims that he's unable to obtain US citizenship for his daughter because she doesn't meet the residency requirements.

After learning about the ACTC from me, he's eager to become FBAR and tax compliant.

The plan would be to get him caught up to speed now using the FEIE and then waiting until next year (once he's compliant) to claim the FTC and ACTC.

The question is whether he's even entitled to the ACTC since his daughter isn't a US citizen. Can this be achieved by applying for an ITIN for the daughter and wife on the delinquent returns?


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## underation (Oct 25, 2018)

> *Know who is a qualifying child. The child must:*
> 
> 
> *Be under 17 at the end of the tax year
> ...


Looks like his daughter is not a Qualifying Child.

https://www.eitc.irs.gov/other-refu...know-about-ctc-and-actc/what-you-need-to-know


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## underation (Oct 25, 2018)

Alltimegreat1 said:


> The father of one of my son's friends recently revealed that he's a US citizen, although *he's never lived in the US*. The child's mother has only German citizenship.
> 
> He *claims* he's unable to obtain US citizenship for his daughter because she doesn't meet the residency requirements.


 (my bolding]

Looks like he's simply stating a fact:



> *Who May Qualify for Acquisition of Citizenship*
> 
> The law in effect at the time of birth determines whether someone born outside the United States to a U.S. citizen parent (or parents) is a U.S. citizen at birth. In general, these laws require that at least one parent was a U.S. citizen, *and the U.S. citizen parent had lived in the United States for a period of time.*.


https://www.uscis.gov/us-citizenship/citizenship-through-parents


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## Alltimegreat1 (Feb 25, 2015)

Thanks for the info. Looks pretty clear-cut that he won't be able to get the ACTC.

I wasn't questioning the accuracy of his "claim," but I also had never attempted to verify it.


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## underation (Oct 25, 2018)

Alltimegreat1 said:


> Thanks for the info. Looks pretty clear-cut that he won't be able to get the ACTC.


You're welcome.


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## Bevdeforges (Nov 16, 2007)

Alltimegreat1 said:


> The question is whether he's even entitled to the ACTC since his daughter isn't a US citizen. Can this be achieved by applying for an ITIN for the daughter and wife on the delinquent returns?


It has nothing to do with his daughter. She is ineligible for US citizenship because he (i.e. her US citizen parent) has not lived in the US for the requisite number of years after the age of 14. He cannot transmit US citizenship.

There is a way that the child could possible get US citizenship if her grandparent is eligible to transmit it - and if she goes to the US and applies from within the US. (Has to have legally entered the US - even on a visa waiver - at the time the application is made.) I don't know all the details, but a US expat group like AARO or FAWCO would have more information on this.


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## Alltimegreat1 (Feb 25, 2015)

That's interesting. The grandfather here (father of the girl's dad) was in the US Army and was only briefly stationed in Germany. He's lived in the US basically his entire life and is still alive.


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## underation (Oct 25, 2018)

Bevdeforges said:


> It has nothing to do with his daughter. She is ineligible for US citizenship because he (i.e. her US citizen parent) has not lived in the US for the requisite number of years after the age of 14. He cannot transmit US citizenship.
> 
> There is a way that the child could possible get US citizenship if her grandparent is eligible to transmit it - and if she goes to the US and applies from within the US. (Has to have legally entered the US - even on a visa waiver - at the time the application is made.) I don't know all the details, but a US expat group like AARO or FAWCO would have more information on this.


It's explained on the UCSIS page I linked to, should the US citizen father wish to explore the possibilities for his child to naturalise as a US citizen.

Personally I'd leave it to the person most concerned to make that decision, once she grows up.


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## Alltimegreat1 (Feb 25, 2015)

Thanks again everyone for the helpful info.

I think he'll want to get the citizenship for her ASAP (via the grandfather route) in order to start claiming the ACTC.


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## underation (Oct 25, 2018)

> Children of U.S. Citizens Residing Outside the United States
> 
> Children residing outside of the United States may obtain citizenship under Section 322 of the INA. A child who regularly resides outside of the United States is eligible for naturalization if all of the following conditions have been met:
> 
> ...


And, helpfully, the webpage includes a definition of a "child":



> _
> Definition of Child_
> 
> In general, a child for citizenship and naturalization [strikeout]purposes[/strikeout]provisions is an unmarried person who is:
> ...


Has the father checked the DNA?


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## Alltimegreat1 (Feb 25, 2015)

Not sure about the graddad here, but the girl is the guy's daughter by law, and I'd say biologically too since they have similar features.


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## underation (Oct 25, 2018)

Alltimegreat1 said:


> Not sure about the graddad here, but the girl is the guy's daughter by law, and I'd say biologically too since they have similar features.


I was being sarcastic. 

I feel sure the father will have no trouble at all turning his minor child into a US citizen in order to claim US refundable tax credits.


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## underation (Oct 25, 2018)

underation said:


> I was being sarcastic.
> 
> I feel sure the father will have no trouble at all turning his minor child into a US citizen in order to claim US refundable tax credits.


Interestingly, however, Wikipedia says:



> The voluntary acquisition of a non-EU or non-Swiss citizenship without permission usually means the automatic loss of the German citizenship.


Wikipedia articles aren’t always correct, of course, and there’s no mention in the Wikipedia article about if what happens to a minor child’s German citizenship if a second citizenship is acquired “for her” while she is still a child.

Another question that occurs to me: who would be responsible for reporting the ACTC income to the German tax agency - the child? or the father?


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## Nononymous (Jul 12, 2011)

If the daughter is 14 already, there's not going to be that many years to collect the ACTC, and it won't be free or simple to obtain US citizenship for her (the process involves a trip to the US). So really there's no money to be made here.

In which case, the father should ask if it's really in his interest to enter the US tax system at this point in time. I would say no bloody way, but that's just me. Presumably if he "has never lived in the US" then he was born in Germany and has no difficulty evading FATCA reporting, and no reason to inflict US tax obligations upon himself.

And one should also ask whether it's in the daughter's interest to acquire US citizenship (or to have US citizenship acquired for her). She's old enough to have a say in the matter. With German citizenship and birthplace she will of course be completely insulated from tax and FATCA problems if she knows to never disclose her status as a US person, but by giving her citizenship now the parents are essentially presenting her with the choice between tax compliance and lying to banks unless she wished to subsequently renounce.

Personally I'm not a big fan of inflicting US citizenship on a child so that someone can collect a small amount of money from the US government. It strikes me as being greedy and short-sighted. And given the daughter's age it would be a very small amount of money.


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## Alltimegreat1 (Feb 25, 2015)

The daughter is 4 years old.

She will not lose her German citizenship by obtaining US citizenship.

Your advice is for him to neglect his FBAR, FATCA, tax reporting obligations since you believe the likelihood of him ever getting caught is very low, right?

Regardless of the likelihood of getting caught, failure to report is a crime, and who knows how sophisticated the IRS could get in the future at cracking down on US persons abroad with virtually no connections to the US. I think his daughter would still qualify as a US person for tax purposes even if she never obtains US citizenship.

Given that he won't owe any taxes and stands to gain $2,000/year, and that staying compliant is not a huge effort for people with modest income and assets, it would seem reasonable to comply.

The daughter could elect to renounce prior to becoming an adult.


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## Nononymous (Jul 12, 2011)

Alltimegreat1 said:


> The daughter is 4 years old.
> 
> She will not lose her German citizenship by obtaining US citizenship.


Ah, I misread something earlier then concerning the child's age. Same point still applies though, is $1400 per year worth both entering the US tax system and delivering up a child's identity to the US government? Not for me, not by a long shot.

I would suggest he look more carefully at the risk to her German citizenship though, because the grandparent route is not acquiring citizenship at birth through a parent, it's actually "immigrating" and naturalizing while on a visit to the US, in my limited understanding of the process.


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## Alltimegreat1 (Feb 25, 2015)

Fair point you make. He'll have to clarify with certainty that both passports can be retained.


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## Bevdeforges (Nov 16, 2007)

Alltimegreat1 said:


> I think his daughter would still qualify as a US person for tax purposes even if she never obtains US citizenship.
> ...
> The daughter could elect to renounce prior to becoming an adult.


No to both of those. The daughter will not be considered a US person for tax purposes unless she obtains US citizenship. She will NOT have a US tax obligation under normal circumstances. If she should have US source income, she'll be eligible for an NR filing (if she even has to file at all).

And no, a minor cannot renounce US citizenship. She would have to be at least 18 (possibly 21) and it would still cost her $2350 (or whatever the fee is at that point - more likely increased rather than reduced). If a parent renounces while his or her children are minors, it has no effect on the children's citizenship.


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## Nononymous (Jul 12, 2011)

Alltimegreat1 said:


> Your advice is for him to neglect his FBAR, FATCA, tax reporting obligations since you believe the likelihood of him ever getting caught is very low, right?


It's not even a question of likelihood. If he's a German citizen living in Germany with no US income sources, there's no "caught" because there's no possibility of penalty enforcement. I would ask where he is vis-a-vis FATCA, though. If German-born his banks can easily remain unaware of his US person status. If he has a US birthplace on his ID, even as a German citizen, it may eventually come to light. While there's no evidence to date that the IRS has the ability or willingness to follow up on FATCA reporting for anyone with no US financial connections, it would still be better if banks did not know that he's a US citizen.



> Regardless of the likelihood of getting caught, failure to report is a crime, and who knows how sophisticated the IRS could get in the future at cracking down on US persons abroad with virtually no connections to the US. I think his daughter would still qualify as a US person for tax purposes even if she never obtains US citizenship.


The penalty for late or non-filing is a percentage of taxes owed. He'd owe zero. I guess there's FBAR penalties, which have never been enforced against non-residents, but those are not collectible outside the US.

It's always worth remembering that the overall compliance rate for non-resident US persons is about 15 percent. The IRS receives 1 million returns from an estimated 6-9 million US persons overseas. That doesn't appear to be changing much since FATCA. Per recent statistics, a whopping 65k have entered the Streamline Program since inception. 

Regarding his daughter, in this case no, she's completely safe at present. She is absolutely not a citizen prior to naturalizing, which is what's required for the grandparent route. It's a bit trickier for children born to a qualifying US parent. They are probably US persons for tax persons even if the birth is never registered at a consulate, but of course if the birth isn't registered the US doesn't know they exist, so no compliance worries. Not surprisingly, since FATCA there's apparently been a noticeable drop in the number of births registered at US consulates!



> Given that he won't owe any taxes and stands to gain $2,000/year, and that staying compliant is not a huge effort for people with modest income and assets, it would seem reasonable to comply.


Only $1400 is actually refundable as cash, though. Anyway, that's his decision. Not a lot of money for me, given the loss of anonymity. Generally speaking nobody is hurt by non-compliance, but plenty have been hurt by compliance (talk to all those small business owners who've been hit by the transition tax).



> The daughter could elect to renounce prior to becoming an adult.


Indeed, though the onus would be on the parent to pay the fee.


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## Bevdeforges (Nov 16, 2007)

Whoops - just checked on whether or not a minor can renounce. They can - sort of. A minor under 16 is presumed to lack sufficient capacity to renounce. Someone under age 18 can renounce only if they can show that they are not doing so under "undue influence" of parents or others. The State Department says this:



> Children under 16 are presumed not to have the requisite maturity and knowing intent to relinquish citizenship; children under 18 are provided additional safeguards during the renunciation process, and their cases are afforded very careful consideration by post and the Department to assess their voluntariness and informed intent. Unless there are emergent circumstances, minors may wish to wait until age 18 to renounce citizenship.


https://travel.state.gov/content/tr...nship/Renunciation-US-Nationality-Abroad.html for more information


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## underation (Oct 25, 2018)

“It used to be that you could claim the Child Tax Credit retroactively in a later year if your child did not have a Social Security number by the time your tax return was due. That provision was eliminated beginning with tax year 2018. The Center on Budgeting and Policy Priorities has estimated that this will eliminate as many as 1 million undocumented children.”

It doesn’t say how many Additional-Child-Taxpayer Credit claimants will be “eliminated.”

https://www.thebalance.com/child-tax-credit-changes-4158690


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## underation (Oct 25, 2018)

underation said:


> Wikipedia articles aren’t always correct, of course, and there’s no mention in the Wikipedia article about if what happens to a minor child’s German citizenship if a second citizenship is acquired “for her” while she is still a child.


The US Embassy says:



> The child must choose between German nationality and the nationality of his/her parents before he/she turns 23 years of age, unless it is legally impossible for him/her to give up his/her parents’ nationality, in which case he/she must apply to the German authorities for dual nationality before turning 21.


So that aspect is okay.

I expect this kid is inevitably going to end up being naturalised as a US citizen, sooner rather than later. And when she’s 23 it will be cheaper to keep the US citizenship than the German.

So it goes. Worse things happen.


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## Alltimegreat1 (Feb 25, 2015)

The quote from the US Embassy pertains specifically to children born in Germany to two non-German parents. Those children are required to eventually decide which passport to relinquish. However, I suspect that this rule will have been changed by the time she turns 23.

A child born to one US parent and one German parent is allowed to keep both citizenships for life.


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## underation (Oct 25, 2018)

Alltimegreat1 said:


> The quote from the US Embassy pertains to children born in Germany to two non-German parents. Those children have to eventually decide which passport to keep. However, I suspect that this rule will be changed by the time she reaches that age.
> 
> A child born to one US parent and one German parent is allowed to keep both citizenships for life.


Everything’s hunky-dory for you then.


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## Nononymous (Jul 12, 2011)

I think you need to look very specifically at the situation for anyone taking the grandparent route, which requires that the child travel to the US and naturalize at an immigration office inside the country. There are instructions available online. 

Whether that can be done without jeopardizing German citizenship is something I do not know. I would be inclined to ask. Though typically the German authorities are more likely to issue a _Beibehaltungsgenehmigung_ for a German acquiring another citizenship than the other way round.


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## underation (Oct 25, 2018)

I would suggest to the child’s father that it might be a good idea to go through Streamlined before he enters America.


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## Bevdeforges (Nov 16, 2007)

underation said:


> I would suggest to the child’s father that it might be a good idea to go through Streamlined before he enters America.


Why is that?


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## Nononymous (Jul 12, 2011)

underation said:


> I would suggest to the child’s father that it might be a good idea to go through Streamlined before he enters America.


Nonsense. The fine folks at the border have no access to any information about tax compliance status.


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## underation (Oct 25, 2018)

Bevdeforges said:


> Why is that?


Because if a German with US citizenship, who has never lived in the US, and until the past year never filed US tax returns or information returns, decides to make use of his US citizenship to make a flying visit to the US to turn his four-year-old into a US citizen, specifically for the purpose of claiming benefits which are paid for by US taxpayers and are currently under particular scrutiny for political reasons; intending to go back to his foreign residence and continue claiming his US benefits and filing his zero-tax-due US returns to allow continued US scrutiny of his entitlement to claim the US social-assistance benefits —

- he might want to start his new-found parasitical US economic existence with a hastily-cleaned slate.


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## Bevdeforges (Nov 16, 2007)

Nononymous said:


> Nonsense. The fine folks at the border have no access to any information about tax compliance status.


Actually, this is more what I was thinking when I asked the question. It's really only necessary to "hastily clean the slate" for an expat looking to sponsor a spouse for a green card.


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## underation (Oct 25, 2018)

Bevdeforges said:


> Actually, this is more what I was thinking when I asked the question.


However, I was answering the question asked (i.e., why would I suggest the child’s father might want to go through the Streamlined Procedures before entering America).

It’s completely reasonable (IMO) for citizens of non-US countries who have (or are entitled to) US citizenship to decline to accept the citizenship obligations when they’re not claiming any of the benefits.

It’s much less reasonable (IMO) to claim the benefits while accepting only the obligations needed to claim a benefit.

No doubt it’s fine with America, though, indeed one could say that nowadays it’s the American Way. And after all, he’ll be delivering the child. Even stevens, I suppose.


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## underation (Oct 25, 2018)

And people wonder why we have FATCA...


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## Nononymous (Jul 12, 2011)

I thought there was concern about entering the US without being tax compliant. There is no concern on this score, people do it all the time.

The father cannot claim his free money without filing tax returns, so that obligation will be met.

Strategically, since the point of this whole exercise is to scam as much money as possible out of the US treasury, the best approach would be to obtain the child's citizenship then enter the streamlined program (or just quiet disclosure with back filing of previous years' returns). I don't know how far back one can claim the child tax credit, but at $1400 per year that could be a pretty good payday.


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## Nononymous (Jul 12, 2011)

Also, the fun doesn't stop when the child turns 18. Finance an expensive US education with loans that qualify for the federal income-based repayment program. Leave the country permanently after graduation. As long as income stays below the FEIE, loan payments are zero, because that's how it's calculated. After 25 years the loan is forgiven.

https://brighttax.com/blog/impact-foreign-earned-income-exclusion-us-expats-student-loans/

There's a few wrinkles but basically it's genius. Thanks, US government!

(Of course the simpler way to deal with student loans is to move abroad and change phone numbers, if the parents didn't co-sign.)


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## Nononymous (Jul 12, 2011)

underation said:


> “It used to be that you could claim the Child Tax Credit retroactively in a later year if your child did not have a Social Security number by the time your tax return was due. That provision was eliminated beginning with tax year 2018.”
> 
> https://www.thebalance.com/child-tax-credit-changes-4158690


If I read that correctly, no retroactive claims of the child tax credit possible, so no advantage to back-filing after the child obtains citizenship and an SSN. Pity, less money to be made.


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