# Child bank account on my FBAR?



## LondonResident

Hello! I would like to open a savings account for my baby at a high street bank in the UK 
(has both US and UK citizenship). I would be a trustee of the account and he couldn't access it until a certain age.

Would I need to put this account on my FBAR? If so, which section does it go in?

As an aside, I want to put away some money for him in an index fund but I'm having trouble navigating the PFIC/UK reporting fund route. I really don't want to have to think about it too much until he is of age. Does anyone have any ideas or know of anyone I can speak to in the UK (maybe send a private message)? It can be difficult to open a US based account without an address there. This really applies to myself as well!

Thanks.


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## underation

LondonResident said:


> As an aside, I want to put away some money for him in an index fund but I'm having trouble navigating the PFIC/UK reporting fund route. I really don't want to have to think about it too much until he is of age. Does anyone have any ideas or know of anyone I can speak to in the UK (maybe send a private message)?


I believe larger brokers will let you open a JISA despite your US citizenship.

I would suggest it's better to invest for him either in the US only or (if you're permanently settled in the UK) in the UK only. That way, you can leave it up to him to decide when he's older whether he does or does not wish to retain dual citizenship, without creating any unnecessary tax pitfalls for him.


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## LondonResident

So a UK JISA is the best route for him?

I'm happy to invest in the US based funds for him. For example, I know Vanguard used to have reporting funds but I no longer see them listed in the UK government spreadsheet and I'm not sure if he needs a US address to open an account. I could always use my parent's address, but then I don't know if they'd report to the UK.


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## Bevdeforges

If you open a bank account (or actually any sort of "financial account") for your child, you would have to report the account on your FBAR if you have any form of signature authority over the account (as you would as a trustee). I suppose you would/could report it as a "jointly held" account, but they you would need to report your child's US SSN and, if the account exceeded the $10,000 threshold, you'd need to file an FBAR for him or her as well.

I'm not sure how those JISA things work, but if the funds are actually in your child's name it would be a nice way to avoid having to mess with FBARs until the fund had at least $10,000 in it. And I'm not entirely sure if it applies to the JISA, but many of the FATCA reporting requirements don't kick in for a "foreign taxpayer" until the fund balances exceeds $200,000. (Also, no return needs to be filed until the annual income for the child exceeds something like $12,000 - as a "single taxpayer.")


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## underation

LondonResident said:


> So a UK JISA is the best route for him?


If you decide on UK investments, a JISA is a good choice IMO. Tax-free - you can't get better than that.


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## LondonResident

Thank you all for your help.

I suppose another option is for my non-US wife to be the trustee.


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## Bevdeforges

LondonResident said:


> Thank you all for your help.
> 
> I suppose another option is for my non-US wife to be the trustee.


However, if the child is a US citizen and has a US SSN she or he will fall under the reporting rules once the account reaches the $10,000 mark and/or the income in his or her own name exceeds $12,000 in a year. (ISAs aren't non-taxable for US purposes - however chances are the IRS wouldn't miss it if the earnings weren't reported.)


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## LondonResident

The reality is that adding another bank account to my FBAR is not something significant. It would need to go in a different section so that's really the question: where do I put it? I would have thought the "Information on Financial Account(s) Where Filer has Signature or Other Authority but No financial Interest in the Account(s)" section but @Bevdeforges suggested the "Information on Financial Account(s) Owned Jointly". I can ask my accountant but I can't imagine it would matter too much to the IRS.

It will take a while for his account to have reportable income but it's not a problem to file an FBAR for my son when time comes.

I wish the FATCA stuff would disappear so I could do something smarted with the money but I read in a thread on here that despite the activism on social media, no one in the US cares. I was trying to figure out where to invest this money and questioned my decision to register him as a US citizen for a moment. Of course, things can change in 18 years when he's no longer a minor.


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## underation

LondonResident said:


> Thank you all for your help.
> 
> I suppose another option is for my non-US wife to be the trustee.


Definitely.

If your son has a UK birthplace, and doesn't acquire any other US "indicia", he won't be troubled with FATCA questions when he is grown (under the IGA as it now stands). If he has a JISA opened by a non-US-citizen parent, he can access it just the same as any other UK 18-year-old, and never bother about the IRS.

Laws can change, of course, but that can be dealt with if/when the need arises.


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## underation

LondonResident said:


> I wish the FATCA stuff would disappear so I could do something smarted with the money but I read in a thread on here that despite the activism on social media, no one in the US cares


They don't have the power to tax UK residents on UK-source income unless the USC files a US tax return reporting the income as US-taxable.

There are however good reasons to file US tax returns and pay the necessary, if you expect to return to live in the US, or have US income/assets. Your son can decide what he wants to do when he's grown.


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## Nononymous

If your son has dual US-UK citizenship, a UK birthplace, and a non-US parent, I would highly recommend that the non-US parent handle all financial affairs and keep US citizenship a deep, dark secret. Set up whatever sort of savings and investment you want, do *not* identify the child as a US person, and you've avoided FATCA reporting and any potential US taxation of investment gains. As an adult your son can then decide whether US tax compliance is in his interests (i.e. if it's unavoidable because he wants to work or study in the US, because obviously there's no benefit to doing so if he has no plans to take advantage of US citizenship).

PS on edit: The fact that you registered your son's birth does not mean that the IRS will one day track him down. Obtaining a US passport will increase his exposure, since there's a requirement to report an SSN, but thus far no evidence that the IRS makes any attempt to contact US citizens abroad who are not compliant. At this point the US government knows that he exists, but he is not in the US tax system, and you can keep him out by treating him as a UK national only, by not disclosing his US citizenship to financial institutions, or reporting his accounts on your FBAR. If you are eligible to claim the US child tax credit, that's a moral dilemma.


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## Bevdeforges

Whether or not you register your child with the consulate, s/he is still a US citizen from birth - and can claim that citizenship at any time. 

On the FBARs, that category for "signature authority but no financial interest" is a tricky one. Technically, it's for situations where a US taxpayer has signature authority over a bank account for their employer, or someone who is an officer in an association has check signing capacity for the association. I'm not so sure it's applicable to a parent serving as a trustee for a child's account - but hey, if you report it, but just in the "wrong" category, I don't think they're going to get too bent out of shape. 



> They don't have the power to tax UK residents on UK-source income unless the USC files a US tax return reporting the income as US-taxable.


I'd be careful about that stance. I really doubt that Boris Johnson ever reported the profit on the sale of his house in London on a US tax return. It was the publicity involved that tipped off the IRS to his tax situation.

The main risk for "overseas taxpayers" is a function of having US based financial assets (bank accounts, investments, other sources of income in the US) that the IRS could potential seize if they had reason to believe there might be a tax iiability.


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## Nononymous

Bevdeforges said:


> I'd be careful about that stance. I really doubt that Boris Johnson ever reported the profit on the sale of his house in London on a US tax return. It was the publicity involved that tipped off the IRS to his tax situation.


If BoJo had been a normal sort of person he could have ignored his US tax obligations, or otherwise failed to mention capital gains from the house. But he apparently had US income sources (book royalties and speaking fees) plus his political career plus he shot his mouth off in public, so in the end it was in his interests to pay up and renounce.


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## underation

Bevdeforges said:


> I'd be careful about that stance. I really doubt that Boris Johnson ever reported the profit on the sale of his house in London on a US tax return. It was the publicity involved that tipped off the IRS to his tax situation.


I assume the income from Johnson's sale would have been reported on his US return by his accountant.

It's perfectly true that the US can't assess a tax claim against a UK resident's UK-source income, unless the US citizen has reported the UK-source income as US-taxable. And of course, even if the USC does report his/her UK-source income as US-taxable, the US has to allow credit for UK tax paid, so it's only when the UK-source income has not been fully taxed by the UK (as with JISAs, or sale of main residence) that US tax is actually due (assuming the taxpayer claims the FTCs s/he is entitled to.)

US CBT is not law in the UK, and the US has no legal grounds for "coming after" a UK resident with only UK-source income for not filing US tax returns to report his/her UK-source income as US-taxable.

Consequently, most US expats don't file US returns.


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## Nononymous

underation said:


> Consequently, most US expats don't file US returns.


Certainly true for dual citizens with no intention of living in the US; possibly less so for single-citizenship US expats who plan to return or who fear potential passport loss due to the new law on outstanding debts.

But that's a longer argument for another day. Main point being, the US has no power to tax anyone's UK-source income if there aren't US assets or income held hostage.


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## underation

Nononymous said:


> Certainly true for dual citizens with no intention of living in the US; possibly less so for single-citizenship US expats who plan to return or who fear potential passport loss due to the new law on outstanding debts.


As I recall, IRS stats show returns for only a small minority of the (est.) 5 or 6 million US citizens living outside the US. I agree, those who have only a US passport, and no residence-country citizenship or PR status, are perhaps more likely to file US returns, but that's always a temporary situation, in the UK.


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## Nononymous

underation said:


> As I recall, IRS stats show returns for only a small minority of the (est.) 5 or 6 million US citizens living outside the US. I agree, those who have only a US passport, and no residence-country citizenship or PR status, are perhaps more likely to file US returns, but that's always a temporary situation, in the UK.


Estimates are 10-15 percent of non-resident US citizens actually file returns. 

The weaker the connection to the US, the less likely to file, I'd imagine.


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## underation

Nononymous said:


> Estimates are 10-15 percent of non-resident US citizens actually file returns.
> 
> The weaker the connection to the US, the less likely to file, I'd imagine.


Indeed. In particular, expats who have US income may need to file in order to reduce the actual tax paid by claiming whatever deductions they can claim.

It's like the law professor says (https://www.expatforum.com/expats/e...nship-based-taxation-live-stream-event.html): the US taxes non-US-resident US citizens by treating US citizenship as a proxy for (imaginary) US domicile. This works for US-source income, for which the US has primary taxing rights and the power to enforce withholding. But it obviously doesn't work for UK-source income, for which the UK has the primary taxing rights and the power to enforce withholding.


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## Bevdeforges

underation said:


> I assume the income from Johnson's sale would have been reported on his US return by his accountant.
> 
> It's perfectly true that the US can't assess a tax claim against a UK resident's UK-source income, unless the US citizen has reported the UK-source income as US-taxable. And of course, even if the USC does report his/her UK-source income as US-taxable, the US has to allow credit for UK tax paid, so it's only when the UK-source income has not been fully taxed by the UK (as with JISAs, or sale of main residence) that US tax is actually due (assuming the taxpayer claims the FTCs s/he is entitled to.)
> 
> US CBT is not law in the UK, and the US has no legal grounds for "coming after" a UK resident with only UK-source income for not filing US tax returns to report his/her UK-source income as US-taxable.
> 
> Consequently, most US expats don't file US returns.


I admit I'm picking nits here - but the law says that US citizens living overseas must report "worldwide income" on their US returns. Not reporting it does not shield it from taxation - however the IRS is highly unlikely to bother claiming (or even auditing) an overseas taxpayer unless there are potentially big bucks to be recovered.

And yes, their only practical recovery method at the moment is seizing the taxpayer's US financial assets. There is some thought (fear, actually) that ultimately the US could make use of FATCA data collected from the banks to push back on overseas taxpayers and/or the foreign banks making the reports.

Agreed, though, that staying off the radar is probably the ideal situation. Though it's hard to do if you have financial assets back in the US or entitlements (say, pensions or US SS benefits). That's what is most at risk for anyone looking to take a stance in the matter.



> Estimates are 10-15 percent of non-resident US citizens actually file returns.
> 
> The weaker the connection to the US, the less likely to file, I'd imagine.


That's really hard to judge, given that some of the more well-to-do overseas residents like to use their attorney or tax preparer's US address for filing purposes. And the estimated figures for how many non-resident US citizens there are include children, dependent spouses married to NRAs and others who legitimately don't have to file.

The other big factor is what seems to be a deliberate attempt to cut funding and staffing to the IRS, which forces them to focus on high profile and "high yield" cases, especially among overseas residents. (Would still love to know what the current president is hiding on his tax returns. :spy


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## underation

Bevdeforges said:


> I admit I'm picking nits here - but the law says that US citizens living overseas must report "worldwide income" on their US returns. Not reporting it does not shield it from taxation - however the IRS is highly unlikely to bother claiming (or even auditing) an overseas taxpayer unless there are potentially big bucks to be recovered.


I agree. If a UK-resident USC files a US return, s/he should report worldwide income as US-taxable in accordance with US law, and claiming FTCs where available, so that his/her whole income can be taken into consideration.

If the UK-resident USC doesn't choose to file a US return, that's perfectly okay too, provided there's no untaxed US-source income to be reported.



> And yes, their only practical recovery method at the moment is seizing the taxpayer's US financial assets. There is some thought (fear, actually) that ultimately the US could make use of FATCA data collected from the banks to push back on overseas taxpayers and/or the foreign banks making the reports.


That would require a (highly improbable) change to UK law - just as the FATCA IGA required a change to UK law.



> Agreed, though, that staying off the radar is probably the ideal situation. Though it's hard to do if you have financial assets back in the US or entitlements (say, pensions or US SS benefits). That's what is most at risk for anyone looking to take a stance in the matter.


I'm not advocating hiding, or hiding income illegally. Both countries claim the right to tax worldwide income. That creates potential conflicts which could result in taxpayers being double-taxed, or, if they lie, escaping taxation altogether in a way that US citizens are not under US law allowed to do (for instance, by claiming both treaty benefits and US benefits).

The solution is to choose to file, or choose not to file - exactly as proposed by the (moribund) Holding bill. Both solutions are entirely honest and entirely legal.

For example: a UK pensioner who receives both US Social Security and the UK State Pension pays UK tax on both, under the terms of the US-UK treaty. If US SS is the only US income, there's no need to file a US tax return as no US tax is due.

You just aren't supposed to try to claim _both_ treaty benefits (other than those allowed by the saving clause) _and_ US benefits.


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## Bevdeforges

underation said:


> For example: a UK pensioner who receives both US Social Security and the UK State Pension pays UK tax on both, under the terms of the US-UK treaty. If US SS is the only US income, there's no need to file a US tax return as no US tax is due.
> 
> You just aren't supposed to try to claim _both_ treaty benefits (other than those allowed by the saving clause) _and_ US benefits.


I take it that you're UK based, and in that case you have a somewhat more reasonable tax treaty than we do here in France. The French treaty basically grants the country of origin of the pension the "right" to tax it. It's fairly simple on the French side, because the French want you to declare your US pension, but then they give you a tax credit in the amount of the French tax generated by it. (The French have a strange way of calculating income taxes, but it can be to your advantage to declare everything and then have them credit you back the taxes on those items they don't tax.)

If you read the US-France treaty carefully, the IRS expects French residents to declare their full French pension and then to use the FTC to offset any US tax generated by the amounts. The way the FTC works makes it a highly imperfect means of avoiding double taxation particularly when you consider that your US SS benefit has already been docked (by the WEP) because you have a "foreign pension."

Let's just say that you do what you have to do.


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## underation

Bevdeforges said:


> I take it that you're UK based, and in that case you have a somewhat more reasonable tax treaty than we do here in France.


Different, at any rate. Social security is taxed only by the residence country. The result is that a US-resident USC gets taxed on the UK State Pension by the US, and may also get taxed by the US on part of the US SS.

While a UK-resident USC gets taxed by the UK on both, thus paying tax on the whole of the US SS, even the portion which would be excluded for the US-resident USC. 

Swings and roundabouts.



> If you read the US-France treaty carefully, the IRS expects French residents to declare their full French pension and then to use the FTC to offset any US tax generated by the amounts.


Since for the UK-source UK State pension the source country is the country of residence, the treatment in both treaties is evidently the same: the residence/source country has taxing rights and the other country concedes. If reported as US-taxable income on a US tax return filed by a UK resident, the US must credit the UK tax paid.




> The way the FTC works makes it a highly imperfect means of avoiding double taxation particularly when you consider that your US SS benefit has already been docked (by the WEP) because you have a "foreign pension."


. 

But that's not double taxation. It's the SSA that's required by US law to apply the WEP in certain circumstances.



> Let's just say that you do what you have to do.


Or ideally (I would say), what works best for you within the law. In the OP’s case, I would suggest that what would work best for the child would be for the non-USC parent to set up any UK investments for him, and the USC parent to set up any US investments for him.


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## LondonResident

I had never considered not filing a US tax return (or FBAR?). Since I’ve been filing, is it too late to revisit the issue? The vast majority of my family lives in the US. What if a source of income from the US later came into play (ie inheritance)?

I think I will let my wife handle my kid’s bank accounts. She can use his UK passport. Sometimes they ask what others countries you pay taxes to. I guess it’s not a lie to say none since he doesn’t need to file a US return yet?

Are there any good resources on a risk based approach to filing? I had the impression that the advice online and maybe this forum is conservative.


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## underation

LondonResident said:


> I had never considered not filing a US tax return (or FBAR?). Since I’ve been filing, is it too late to revisit the issue? The vast majority of my family lives in the US. What if a source of income from the US later came into play (ie inheritance)?


My personal view: if you have US connections and value the citizenship, it's reasonable to comply with the citizenship obligations - including the tax obligations. Just my own opinion.



> I think I will let my wife handle my kid’s bank accounts. She can use his UK passport. Sometimes they ask what others countries you pay taxes to. I guess it’s not a lie to say none since he doesn’t need to file a US return yet?


I agree.



> Are there any good resources on a risk based approach to filing? I had the impression that the advice online and maybe this forum is conservative.


I don't know. I take a DIY approach to questions of risk.


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## underation

One thought on risk: theoretically, the US could start requiring proof of US tax compliance as a condition of issuing or renewing (adult) US passports.

It may never happen, but it seems to me a risk worth avoiding, for anyone who wants to keep the passport.


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## Bevdeforges

LondonResident said:


> Are there any good resources on a risk based approach to filing? I had the impression that the advice online and maybe this forum is conservative.


I don't think you're going to find much publicly available on the subject, simply because of the element of risk involved for someone openly baring their strategies, if they are anything other than full compliance. OTOH, back in business school, our tax professor made a big point of explaining how the US tax system is based on "voluntary compliance." They simply don't have the staff nor the time and money to check each and every return in any great detail.



> One thought on risk: theoretically, the US could start requiring proof of US tax compliance as a condition of issuing or renewing (adult) US passports.


At the moment, there is legislation on the books saying that a USC can be denied renewal of a passport (or issuance of one, I suppose) if they owe $50,000 in back taxes and/or fines and penalties to the IRS. Have not yet heard of anyone being prevented from obtaining a passport renewal from this, but who knows?

The other big factor is your "local" tax treaty. Different provisions in the various tax treaties make certain types of compliance "fudges" more or less safe to fall back on. And, there is always the possibility that you may move or spend time in a different country with a different tax treaty with the US.


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## underation

Bevdeforges said:


> I don't think you're going to find much publicly available on the subject, simply because of the element of risk involved for someone openly baring their strategies, if they are anything other than full compliance.


There's a reason there's not much publicly available about the risk attached to non-US-residents not filing US tax returns: it's because there's no risk.

The minority who file, presumably do so for various reasons. 

1) Investing in the US is a way to make money, and US citizenship lets you use the US tax system to maximize your returns. 

2) Some US citizens see themselves as expats rather than immigrants: even if they never return to the US to live, they identify as American and naturally comply with American laws.

3) And some suffer from unnecessary fear of the IRS.

The overwhelming majority, who _don't_ file US tax returns, don't have any reason to be discussing the "risks" of their "strategy", because nothing ever happens to them. There is no risk. How could there be?



> OTOH, back in business school, our tax professor made a big point of explaining how the US tax system is based on "voluntary compliance."


The US system is certainly very different from the UK system, where considerable effort is devoted to getting withholdings correct so that most of the population won't need to file tax returns at all. No doubt the US system allows far more scope to far more individuals for creatively addresing the issue of tax credits and refunds. That'll no doubt be one reason CBT can't be tinkered with.



> They simply don't have the staff nor the time and money to check each and every return in any great detail.


They already have most of the tax owed on overseas taxpayers' US-source income, through withholding. It's probably quite dispiriting chasing US tax "owed" on overseas taxpayers' non-US-source income, at any rate from high-tax countries such as Britain and France, given that (a) most of the tax is not really owed and would just have to be written off with tax credits, and (b) they can't actually collect the CBT "top-up" tax unless the taxpayer voluntarily pays.


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## Bevdeforges

> 3) And some suffer from unnecessary fear of the IRS.


Actually, I think this is the Big One. The IRS "compliance system" even back in the States is based on fear. Press releases about them "catching" big tax evaders (regardless of whether they are domestic or "international") generally come out in the weeks just before the April 15th filing deadline. 

And, there is no particular reason for anyone to draw attention to themselves if they are not in compliance (and realize it). Why poke the bear? OTOH, it's also pretty clear that many of the estimated x million USCs resident overseas have no clue that they are even supposed to be filing US taxes. 

There is also the way the US tax system is set up. Not only do they rely on voluntary reporting of income items, they then make you calculate your own taxes, using a wide variety of "options" and "choices." Have never tested it out (for obvious reasons) but if you were to file a return completely "forgetting" certain beneficial options you were entitled to take, I'm fairly certain they would NOT correct your overpayment and send you the money back. You'd have to file an amended return after you'd found your "mistake." So, there isn't any one "right" answer to "how much tax do I pay?"

On the plus side, I suspect that is the main reason that they don't fuss too much if you "probably" don't owe any taxes. Sure, technically you are "supposed to" file, but "no harm, no foul." (And actually, the folks in the overseas IRS office used to advise folks not to bother reporting certain types of locally sourced income that would be too difficult to claim the appropriate credits for "by the book.")


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## underation

Bevdeforges said:


> Actually, I think this is the Big One. The IRS "compliance system" even back in the States is based on fear. Press releases about them "catching" big tax evaders (regardless of whether they are domestic or "international") generally come out in the weeks just before the April 15th filing deadline.


It would be interesting if anyone could point to a case in which non-US-resident citizens of other countries were being pursued by the US for not paying US taxes on non-US-source income. Every case I've seen involves US-resident tax evaders.



> And, there is no particular reason for anyone to draw attention to themselves if they are not in compliance (and realize it). Why poke the bear? OTOH, it's also pretty clear that many of the estimated x million USCs resident overseas have no clue that they are even supposed to be filing US taxes.


It's also pretty clear that when FATCA draws it to their attention, many just ignore it and either renounce, to recover their data protection rights, or sign the W-whatsit form and don't care about their accounts geting reported.



> There is also the way the US tax system is set up. Not only do they rely on voluntary reporting of income items, they then make you calculate your own taxes, using a wide variety of "options" and "choices." Have never tested it out (for obvious reasons) but if you were to file a return completely "forgetting" certain beneficial options you were entitled to take, I'm fairly certain they would NOT correct your overpayment and send you the money back.


They used to, long ago in the days when I lived in the US and filed US tax returns. I'm sure you're right that they wouldn't do it nowadays.



> On the plus side, I suspect that is the main reason that they don't fuss too much if you "probably" don't owe any taxes. Sure, technically you are "supposed to" file, but "no harm, no foul." (And actually, the folks in the overseas IRS office used to advise folks not to bother reporting certain types of locally sourced income that would be too difficult to claim the appropriate credits for "by the book.")


They don't fuss at all if you don't file a US tax return How could they? 

Think about it. 

The tax due on any US-source income is paid via withholding. Filing a return would probably result in a _refund_, not a tax bil. 

While by definition there is no US tax due on residence-country-source income, unless the USC files a US return reporting the residence-country-source income as US-taxable. The IRS needs that return to be able to assess.

USCs have plenty of options - a fact well-recognised by most. Comply, comply selectively, ignore the whole charade, or renounce. Only the first two risk trouble with the IRS, and the risk is always pretty remote unless there is suspicion of actual crime.


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## Bevdeforges

The Big Unknown at the moment is the FATCA reporting by the banks. If the IRS ever actually looks at all the data coming in from foreign banks (well, actually from the foreign governments) and sees that John Doe, SSN #999-99-9999 has a couple of huge accounts totally several million $ and hasn't declared any sort of foreign bank interest, they could theoretically "look into" Mr. Doe's returns. At present, it doesn't appear that they are doing this routinely, but might do so if they had found something "funny" in returns that had been filed.

Granted, the best approach might be simply not to file at all (i.e. drop off the radar), but that could be problematic if Mr. Doe has any significant financial assets or interests in the US that might generate a 1099 or other tax withholding document. That's probably the key factor - ties to the US that would signal a filing obligation.

It's not that uncommon for the originating country to withhold income tax from pension payments remitted to someone resident overseas. Under the US-France treaty, US SS is only taxable by the US (i.e. the originating country), and the same goes for French pensions paid to US residents. It's one of the reasons that "partial compliance" tends to be a practical alternative for many retired US expats.


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## underation

Bevdeforges said:


> The Big Unknown at the moment is the FATCA reporting by the banks. If the IRS ever actually looks at all the data coming in from foreign banks (well, actually from the foreign governments) and sees that John Doe, SSN #999-99-9999 has a couple of huge accounts totally several million $ and hasn't declared any sort of foreign bank interest, they could theoretically "look into" Mr. Doe's returns. At present, it doesn't appear that they are doing this routinely, but might do so if they had found something "funny" in returns that had been filed


Interest earned by a citizen of another country, in his/her home country, and fully taxed by the home country, isn't US-taxable unless the individual files US tax returns - in which case s/he probably claims credit for the tax paid. And FATCA data is not supposed to be used in that way, where there's no grounds for suspecting crime. Audit, perhaps.

However, my personal view is that anyone with several million $ should either renounce or comply with his/her citizenship obligations. I'm untouched by the predicament of rich US citizens who use the citizenship but skip the filing. 



> Granted, the best approach might be simply not to file at all (i.e. drop off the radar), but that could be problematic if Mr. Doe has any significant financial assets or interests in the US that might generate a 1099 or other tax withholding document. That's probably the key factor - ties to the US that would signal a filing obligation.





> It's not that uncommon for the originating country to withhold income tax from pension payments remitted to someone resident overseas.


If US tax has been withheld, it's probably in the taxpayer’s interest to file to claim whatever deductions s/he can claim.

I am not advocating not filing - not at all. I'm just pointing out that there's really no need to feel anxious or feel one must keep under some imaginary IRS radar if one has no US-source income and doesn't want to file. The IRS can't do anything, if there's no evidence of tax crime or money-laundering.

The problems are with FATCA IGAs, as far as I'm concerned, and that's something that only the residence country can properly fix.


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## Bevdeforges

underation said:


> Interest earned by a citizen of another country, in his/her home country, and fully taxed by the home country, isn't US-taxable unless the individual files US tax returns - in which case s/he probably claims credit for the tax paid. And FATCA data is not supposed to be used in that way, where there's no grounds for suspecting crime. Audit, perhaps.


It's my "inner accountant" speaking here, but interest earned overseas is only taxable in the US if the taxpayer is subject to US taxes - usually by being a USC (regardless of whether or not the taxpayer is a dual national). And actually, it has nothing to do with whether or not the interest is or isn't subject to tax in the taxpayer's country of residence. "Tax-free" account interest is supposed to be reported for US tax purposes - however many of the bi-lateral tax agreements specifically exempt certain tax-free accounts from reporting by the banks. The choice of reporting or not is then pretty much up to the taxpayer.



> However, my personal view is that anyone with several million $ should either renounce or comply with his/her citizenship obligations. I'm untouched by the predicament of rich US citizens who use the citizenship but skip the filing.


Depends how you want to define "rich."



> If US tax has been withheld, it's probably in the taxpayer’s interest to file to claim whatever deductions s/he can claim.


I'm not talking about US tax here. The UK withholds taxes from certain types of pensions paid outside the UK. Other countries do something similar. How to handle pensions paid to a US citizen is one of those things that the individual has to decide for themselves. 



> I am not advocating not filing - not at all. I'm just pointing out that there's really no need to feel anxious or feel one must keep under some imaginary IRS radar if one has no US-source income and doesn't want to file. The IRS can't do anything, if there's no evidence of tax crime or money-laundering.
> 
> The problems are with FATCA IGAs, as far as I'm concerned, and that's something that only the residence country can properly fix.


Sometimes not filing at all is the way to go - especially for those with no US-source income (say, "accidental Americans"). One thing to remember is that, even in the IGAs, they are only talking about reporting of financial accounts - with year-end balances. At this point there is no reporting of interest or other income earned on the accounts, and there is no reporting of other forms of income (salary, for example) between countries.


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## underation

Bevdeforges said:


> It's my "inner accountant" speaking here, but interest earned overseas is only taxable in the US if the taxpayer is subject to US taxes - usually by being a USC (regardless of whether or not the taxpayer is a dual national).


When it's UK source income, and the taxpayer resides in the UK, the UK has primary taxing rights.

If that's true of all the taxpayer's income, the taxpayer owes no tax to the US. 



> And actually, it has nothing to do with whether or not the interest is or isn't subject to tax in the taxpayer's country of residence.





> "Tax-free" account interest is supposed to be reported for US tax purposes.


Which is to say, reporting UK-source account interest to the US for US tax purposes is a US citizenship obligation. It's irrelevant for an individual who isn't interested in the citizenship and therefore has no need to be concerned about the obligation. 

That's why so many of us never even heard of CBT until FATCA IGAs came into force. We didn't need to know.




> I'm not talking about US tax here. The UK withholds taxes from certain types of pensions paid outside the UK. Other countries do something similar. How to handle pensions paid to a US citizen is one of those things that the individual has to decide for themselves.


Sorry but I don't follow.



> One thing to remember is that, even in the IGAs, they are only talking about reporting of financial accounts - with year-end balances. At this point there is no reporting of interest or other income earned on the accounts, and there is no reporting of other forms of income (salary, for example) between countries.


It's being treated as reportable that's offensive. (Not a problem in practical terms, for me, because unlike the hypothetical non-rich $2 million-owning John Doe, I promptly renounced. )


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## Bevdeforges

WRT the US-UK tax treaty, what you're saying is for the most part correct. However, the various treaties vary by country and what works for the UK may or may not work for France or Spain or any other specific country and set of circumstances. 

Overall, if you have NO financial ties to the US, it's pretty much up to you if you want to bother filing US tax returns or not. There are any number of very legitimate reasons why a US citizen living abroad might not need to file a US return. 

The risk factors come in for those who have worked in the US and may be entitled to US Social Security benefits, those who may inherit something from a US based friend or relative, or those who have bank or brokerage accounts back in the US.

As far as FBAR is concerned, there are lots of other tax systems that expect taxpayers to disclose any foreign holdings they have - though most don't seem to require the level of detail that is required by the US (i.e. that "high balance" stuff). And, reporting the existence of any foreign accounts can be important if you hope to pass on those funds to your own heirs one day. 

I don't like CBT any more than anyone else does. But what to do about it winds up being a very personal choice, depending on your circumstances and what country you live in at present, as well as any other country you may possibly live in some time in the future.


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## underation

Bevdeforges said:


> WRT the US-UK tax treaty, what you're saying is for the most part correct. However, the various treaties vary by country and what works for the UK may or may not work for France or Spain or any other specific country and set of circumstances.
> 
> Overall, if you have NO financial ties to the US, it's pretty much up to you if you want to bother filing US tax returns or not. There are any number of very legitimate reasons why a US citizen living abroad might not need to file a US return.
> 
> The risk factors come in for those who have worked in the US and may be entitled to US Social Security benefits, those who may inherit something from a US based friend or relative, or those who have bank or brokerage accounts back in the US.


Exactly. The US has primary taxing rights on US-source income (unless a treaty says otherwise), and the US also has the ability to enforce its tax rules by withholding -- regardless of whether the person receiving the income is or is not a US citizen. 

In contrast, unless a treaty says otherwise, the US *does not* have primary taxing rights on non-US-source income received by an individual who lives outside the US. The individual, if a USC, may or may not choose to comply with US tax rules and report non-US-source income to the US as US-taxable, claiming FTCs for tax withheld by the source country and voluntarily paying "top-up tax" to the US if the non-US-source income hasn't been fully taxed by the source and/or residence country. 

Just another bit of US deeming. The US pretends to be able to enforce US taxation of non-US-source income received by US citizens living outside the US, but it's not the recipient's citizenship which determines which country has the power and the right to tax that income.



> As far as FBAR is concerned, there are lots of other tax systems that expect taxpayers to disclose any foreign holdings they have - though most don't seem to require the level of detail that is required by the US (i.e. that "high balance" stuff). And, reporting the existence of any foreign accounts can be important if you hope to pass on those funds to your own heirs one day.


Indeed. FBAR, being optional, is not a problem. It's FATCA that's offensive. The FATCA IGAs require banks to treat naturalized citizens who were born in America as potential tax cheats, even if they have no US-source income and never file US tax returns. (It is of course impossible to commit evasion of US taxation if you don't live in America, don't receive any un-taxed US income, and never file US tax returns.)

The IGA countries do this (at any rate the UK does this) so they can check up on their resident USCs' bank accounts and see if there's unexplained UK-taxable income. I wouldn't object, if they were doing it to all UK residents. I wouldn't even object if they had the decency to come clean about what they were doing and why. I _do_ object - vehemently - to suddenly being made _persona non grata_ to domestic banks without so much as an explanation or justification.

A situation created by the country of residence, and only fixable by the country of residence. Probably not going to happen.


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## LondonResident

Interesting discussion. I'm a complete layman but I definitely have some sort of fear of the IRS. I imagine being stopped at the border, for example, if I didn't submit returns or FBARs. I work in IT and in my head I see a giant database where joining "known taxpayers" with the "submitted returns" table is a trivial way of finding out who needs to be dealt with.

I'm only have citizenship of the US and it's likely that at some point I will have assets in the US. Therefore it seems like the safe thing to do is keep filing the returns but let my wife handle my sons affairs in the UK. 

I rarely owe any money to the IRS but I do have an accountant and they are expensive. Then again, my tax return in the UK is a page or two with nice colours and big text whereas my US tax return looks like it was typed in the 80s and is at least 50 pages of all sorts of exemptions and credits that I wouldn't know about on my own.


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## underation

LondonResident said:


> Interesting discussion. I'm a complete layman but I definitely have some sort of fear of the IRS. I imagine being stopped at the border, for example, if I didn't submit returns or FBARs. I work in IT and in my head I see a giant database where joining "known taxpayers" with the "submitted returns" table is a trivial way of finding out who needs to be dealt with.


Indeed. And if they're trying to construct a case against a US resident who is suspected of stashing income in a non-US account to avoid US taxation, no doubt they may check the FATCA reports to see if they can find the suspect's SSN. But that tactic can't be used against US citizens residing outside the US, since the accounts are not in fact "foreign" and no US tax has been evaded.



> I'm only have citizenship of the US and it's likely that at some point I will have assets in the US. Therefore it seems like the safe thing to do is keep filing the returns but let my wife handle my sons affairs in the UK.


Yes. If you don't have citizenship, it's best to do everything by the book, bureaucratically, even if you have ILR. The US can't do anything to you while you're resident in the UK, but HMG could, if it became policy to do so.


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## Nononymous

Fear of the IRS is somewhat overstated. 

First off, there's no border database where your tax compliance status is checked upon entry to the US. The only way for you to be detained is if you have a large outstanding debt, and even then it's only to obtain contact details so the IRS can come visit (unless of course you're an actual tax criminal with a warrant for your arrest, but then you'd be smart enough not to enter the US).

Secondly, I've not heard of the IRS making great efforts to pursue anyone who stops filing. There are plenty of legitimate reasons to do so, such as choosing not to work, having no income, and being supported by one's spouse. But obviously if you've been filing returns for a number of years, it's possible they'd notice if you suddenly ceased.

As you've by know learned, the IRS has no collection mechanism against anyone in the UK, even if they are a US citizen only. Payments of US taxes owed are entirely voluntary. However, if you one day plan to return or acquire US assets, perhaps best not to create a problem for yourself. There is also the not-entirely-hypothetical threat of passport revocation for anyone with a debt over $50k, which is an issue for anyone without a second citizenship. (Not an issue for someone never in the system, but more of a risk to someone who had been filing then stopped.) These are all very small risks - the IRS doesn't seem to be terribly omniscient or omnipotent when it comes to non-residents - but I'm obliged to mention them. Also, with respect to inheritance, any US taxes are paid by the estate, then whatever monies are due to an overseas beneficiary are simply wired over - there is no check on the recipient's citizenship or compliance status. More complicated obviously if real estate or other US assets are involved, I would imagine.

Anyway, what to do? Your son can be easily isolated from all this US tax nonsense. Have your wife set up his accounts, never mention US citizenship (yes that's lying, because he is a US person, but who cares?) so there is no FATCA reporting. Keep his account off of your FBAR, and do not claim him as dependent. If you are eligible for the child tax credit (up to $1400 per year) you'll have to think about whether it's worth "outing" him to collect it.

For you, if and when the US tax burden becomes too problematic, you can renounce or stop filing. But I wouldn't recommend doing that before you obtain UK citizenship. And if Brexit goes completely pear-shaped it might be nice to have the option of bailing - in which case your tax compliance would be necessary to apply for a spousal green card.


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## underation

> Your son can be easily isolated from all this US tax nonsense. Have your wife set up his accounts, never mention US citizenship (yes that's lying, because he is a US person, but who cares?) so there is no FATCA reporting. Keep his account off of your FBAR, and do not claim him as dependent. If you are eligible for the child tax credit (up to $1400 per year) you'll have to think about whether it's worth "outing" him to collect it.


I would suggest that it's not really necessary (nor, in my opinion, advisable or right) for the UK citizen who opens the JISA to lie about her son's citizenship. The provider's terms and conditions will make it clear whether they're willing to open a JISA for a minor US beneficiary.


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## Nononymous

underation said:


> I would suggest that it's not really necessary (nor, in my opinion, advisable or right) for the UK citizen who opens the JISA to lie about her son's citizenship. The provider's terms and conditions will make it clear whether they're willing to open a JISA for a minor US beneficiary.


I beg to differ. There are two issues. One, what sort of investments will be allowed, will there be restrictions? Two, the point is to fully isolate the child from any FATCA reporting so that upon reaching adulthood there will be less risk to them if they choose to be non-compliant. If they are also kept off parental FBARs and returns, the IRS will not be aware of their existence.


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## underation

Nononymous said:


> I beg to differ. There are two issues. One, what sort of investments will be allowed, will there be restrictions? Two, the point is to fully isolate the child from any FATCA reporting so that upon reaching adulthood there will be less risk to them if they choose to be non-compliant. If they are also kept off parental FBARs and returns, the IRS will not be aware of their existence.


But there is no risk for the child, nor for his UKC parent, provided the UKC parent who opens the account hasn't engaged in deception. The JISA provider will be well informed if the baby's citizenship has implications, and will comply with any legal restrictions. If the parent lies, in order to evade the restrictions, that's fraud.

This myth that UK citizens holding US citizenship have to hide their existence from the IRS really needs to be squashed.


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## Nononymous

Last post on the subject, won't engage in lengthy debate. Is it better that the IRS not know of a person's existence, or that the person rely on continued US inability or lack of interest in pursuing them, as is currently the case? I would take the first option, personally. I think it's the better long-term bet. 

One wrinkle here is that the JISA (and also ISA) may not be FATCA-reportable anyway, like an RRSP in Canada. But once the child's US person status has been acknowledged to a bank, future reportable accounts would obviously be reported.


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## underation

Nononymous said:


> Last post on the subject, won't engage in lengthy debate. Is it better that the IRS not know of a person's existence, or that the person rely on continued US inability or lack of interest in pursuing them, as is currently the case? I would take the first option, personally.


The IRS is not the issue here. A UK citizen who opens a JISA (claiming a UK tax benefit) has to provide honest answers to the provider's questions, so that the provider can determine eligibility.

If the citizenship of the beneficiary has eligibility implications (I have no idea whether it does or not), lying about the citizenship is against the law. UK law, not US citizenship obligations.

It's quite simple. If the UKC parent finds that she can't open a JISA for the baby, she can open an ISA and give the money to her son when he's grown. Or she can invest the money for her son in some other, _legal_ way. A little research may be needed.


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## Bevdeforges

> The IRS is not the issue here. A UK citizen who opens a JISA (claiming a UK tax benefit) has to provide honest answers to the provider's questions, so that the provider can determine eligibility.


There is a middle ground here. The bank reporting requirements under FATCA and the bi-lateral agreements are the bank's responsibility. If the bank never asks the question about the child's nationality (or never asks for "all" the child's nationalities) then there is no need to lie about anything. Not all countries require this sort of information as part of their identification documents.

OTOH, in those countries where birthplace is part of your identification, chances are that the banks will probably report the account as part of their regular FATCA reporting for any and all customers with a US birthplace, even if they have produced a CLN. Particularly for banks that want to be able to do business in the US, this is simply a matter of covering their own butts. (Pretty much the same thing individuals are doing when they decide to file "something" with the IRS to avoid later hassles.)



> I work in IT and in my head I see a giant database where joining "known taxpayers" with the "submitted returns" table is a trivial way of finding out who needs to be dealt with.


So do, or "did," I - but I can assure you that there is no giant database of taxpayers like what you imagine. The IRS data systems date back to the 1990s and, certainly in the current political climate, the IRS budget continues to be cut back rather than supplemented to try to keep their systems up to date in any sense.

As long as what you do file demonstrates that you are attempting to make a "good faith" filing (at least for all US source elements of which the IRS has or might have knowledge - those things for which you receive a 1099, W-2 or other IRS document) there's really little or nothing to worry about.


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## underation

Bevdeforges said:


> There is a middle ground here. The bank reporting requirements under FATCA and the bi-lateral agreements are the bank's responsibility. If the bank never asks the question about the child's nationality (or never asks for "all" the child's nationalities) then there is no need to lie about anything. Not all countries require this sort of information as part of their identification documents.


If a JISA provider asks for the beneficiary's citizenship, it may be because the citizenship is relevant for determining whether the JISA can be provided. If the JISA provider doesn't ask about the beneficiary's citizenship, it's safe to assume that the citizenship of the baby doesn't have any implications for eligibility. It is the provider's responsibility to ask the question if the information is required by law; the UKC parent doesn't have to volunteer any information about the baby's citizenship if it's not required.



> OTOH, in those countries where birthplace is part of your identification, chances are that the banks will probably report the account as part of their regular FATCA reporting for any and all customers with a US birthplace, even if they have produced a CLN. Particularly for banks that want to be able to do business in the US, this is simply a matter of covering their own butts.


Under the UK FATCA legislation, FIs are required by law to treat the applicant for a new account as a US Person if the applicant has an unambiguous US birthplace and no CLN and no "reasonable explanation". It's not just to cover their backs - it's required by UK law. In this case, however, the applicant for the account isn't a US citizen, so the FI isn't required to report the account because of the parent; whether the FI has an obligation to report the account because of the baby's citizenship, I do not know. 

Two different sets of UK regulations: those controlling eligibility for tax-free accounts (in connection with which the baby's citizenship may or may not be relevant), and those controlling the FI's AEOI reporting responsibilities (in connection with which the baby's citizenship may or may not be relevant). It's very easy to find out what matters and what doesn't, simply by asking the JISA provider


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## Bevdeforges

underation said:


> If a JISA provider asks for the beneficiary's citizenship, it may be because the citizenship is relevant for determining whether the JISA can be provided. If the JISA provider doesn't ask about the beneficiary's citizenship, it's safe to assume that the citizenship of the baby doesn't have any implications for eligibility. It is the provider's responsibility to ask the question if the information is required by law; the UKC parent doesn't have to volunteer any information about the baby's citizenship if it's not required.


If the provider asks about the baby's citizenship, it is perfectly fine to say that the child is British (due to the one British parent). If they don't ask anything further, then you're done. 

Like my Dad always said, answer the question you're asked, and don't volunteer any extraneous information.



> whether the FI has an obligation to report the account because of the baby's citizenship, I do not know.


Which is precisely my point. Answer the question that is posed, not anything else.


> It's very easy to find out what matters and what doesn't, simply by asking the JISA provider


Or just pay close attention to what the provider actually asks, and don't volunteer anything they don't ask about.


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## underation

Bevdeforges said:


> If the provider asks about the baby's citizenship, it is perfectly fine to say that the child is British (due to the one British parent). If they don't ask anything further, then you're done.


 If US citizen beneficiaries aren't eligible for a JISA, the provider will need to ask whether the baby is or is not a US citizen. 

If JISAs can't be opened for a USC beneficiary, the FATCA question doesn't arise.

If US citizenship of the beneficiary isn't relevant for JISA eligibility, then, assuming the baby wasn't born in the US there will be no US Person "indicia."

So the first step would be to find out whether the baby's US citizenship does or does not matter, for JISA eligibility. If it doesn't matter, it's then up to the parents how they want to answer any AEOI questions about the beneficiary's tax-residence(s), I agree.


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## Bevdeforges

> So the first step would be to find out whether the baby's US citizenship does or does not matter, for JISA eligibility. If it doesn't matter, it's then up to the parents how they want to answer any AEOI questions about the beneficiary's tax-residence(s), I agree.


No idea how it is in the UK, but in France and in Germany for sure, it's more often a bank or financial institution policy than anything in law when they won't accept a "US person" for a particular investment or account. "Don't ask, don't tell" works in many situations like this.


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## underation

Bevdeforges said:


> No idea how it is in the UK, but in France and in Germany for sure, it's more often a bank or financial institution policy than anything in law when they won't accept a "US person" for a particular investment or account. "Don't ask, don't tell" works in many situations like this.


The JISA is a tax-free account. There are rules about eligibility.

If US citizenship held by the beneficiary doesn't affect eligibility, the question "Is the beneficiary a US citizen?" is unlikely to be asked.

If US citizenship held by the beneficiary _does_ affect eligibility, then the question _will_ be asked.

It's not a "Don't ask, don't tell" situation. Nothing to do with FI policy. It's not the provider who determines what questions must be asked, it's HMG.

But there's no reason it should be a problem, either way. As a dual US/UK citizen, with two single-citizenship parents, one US, one UK, the baby's in a very advantageous position. The USC parent can invest tax-efficiently in the US, and the UKC parent can invest tax-efficiently for him in the UK. When he reaches 18, he can access his savings in both countries with minimum hassle, and make his own decisions about where he wants to work and live, and whether he wants to be US, UK, or dual.

Lucky boy!  

No need to be bothered too much about a JISA, if it turns out the citizenship is a problem. For this boy, there are copious alternatives.


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