Tax Law (Questions About Taxes)/Is this true yes or no question?
U.S. citizens born abroad are technically liable for taxes even
if their parents don’t register their birth with American authorities, according to Gregory Wald, principal at Squire Patton Bogg
Should expats get US passports for their newborn children?
Posted on February 23rd, 2015
When employees on international assignment have children abroad, they must
determine whether they want their children to have U.S. citizenship.
For some employees on international assignment, their time overseas
includes additions to their families. Having a child abroad presents many
challenges for an assignment, especially in regard to the length of the
stay. This is particularly true for citizenship, The Wall Street Journal
Children born abroad to U.S. parents are technically already citizens.
However, the U.S. State Department noted the parents must complete
paperwork and meet certain requirements for these children to be
officially considered U.S. citizens. This includes completing Form FS-240,
Consular Report of Birth Abroad of a Citizen of the United States of
These employees have the opportunity to obtain a U.S. passport for their
newborn children but have many things to consider before taking this step.
What makes this decision difficult is many of the deciding factors don’t
affect a child until he or she is an adult.
Paying US taxes Even if a person never lives in the U.S., he or she must
pay U.S. income taxes as a citizen, the Journal explained. This means
employees can remain abroad until their children are adults, and if those
children start earning income, they must report that income to the IRS
despite never living in the U.S.
The U.S. is one of a handful of nations that have this tax system, and
many expats are starting to see the consequences of not complying with the
rules. The U.S. government has enacted legislation to crack down on
Americans evading taxes by stashing money overseas, and many well-meaning
expats have been caught in the crossfire because they didn’t know they had
to pay taxes to the U.S. on the income they earned overseas.
Squire Patton Boggs Principal Gregory Wald told the news source this
applies even if parents don’t file a CRBA, though the enforcement isn’t
very intense. However, parents may not want to take the chance that their
children will face consequences in adulthood.
Signing up for the draft Jessica, a dual citizen of the U.S. and Australia
who had her son in Perth in 2011 and preferred to omit her last name, told
the Journal one of her other fears in addition to tax was U.S. rules
regarding the military draft.
According to the U.S. Selective Service, all male U.S. citizens must
register when they are between 18 and 25 years of age. This includes dual
citizens. While Jessica’s son may live abroad his entire life, the U.S.
government can still conscript him for the military.
Making the decision Of course, the ultimate choice is emotional as well as
practical. Jessica had concerns about delaying her son’s citizenship
paperwork because she didn’t know if the benefits were greater than the
disadvantages, especially because she made the choice for him. Kristin
Louise Duncombe, who lives in France with her husband, a citizen of
Argentina and Italy, made the opposite choice.
“I wanted the kids to have U.S. nationality for emotional reasons,” she
wrote in an email to the Journal. “I mean how could they not be American
if I am? That said, I am starting to wonder if it is not going to be a
huge burden for them.”
Children can give up their citizenship when they become adults, but this
is a costly endeavor, with the U.S. government recently raising the price.
Parents may want to consider how long they plan to stay abroad. If their
assignments last only a few years and their employers haven’t laid out
plans for an extension or additional assignment immediately following, it
makes more sense to complete the CRBA.
When American Expats Don’t Want Their Kids to Have U.S. Citizenship
By Chantal Panozzo
Feb 18, 2015 12:00 am ET
In 2011, a dual American-Australian citizen gave birth to her first child
in Perth, Australia, where she lives with her Australian husband.
Jessica, who asked that her last name not be used, says she initially
looked forward to getting her infant son an American passport. But after
considering the implications of American citizenship, including the
possibility of her son being drafted or taxed by a country where he may
never live, she and her husband decided against applying for the moment.
“Ultimately it just seemed unfair to make the choice for him if there
wasn’t a clear, long-term benefit for American citizenship,” she said.
A person born abroad to a U.S. citizen parent or parents will acquire U.S.
citizenship at birth provided the statutory requirements of the
Immigration and Nationality Act for transmission of U.S. citizenship are
met, and regardless of whether the person is ever documented as a U.S.
citizen (by obtaining a Consular Report of Birth Abroad of a U.S. Citizen,
a U.S. passport, and/or a Certificate of Citizenship). Practically
speaking, however, in general “it is the process of being documented as a
U.S. citizen that would result in official government recognition of the
child’s U.S. citizenship status,” according to Karen Christensen, Deputy
Assistant Secretary for Overseas Citizens Services, in the Bureau of
Consular Affairs at the Department of State.
That said, U.S. citizens born abroad are technically liable for taxes even
if their parents don’t register their birth with American authorities,
according to Gregory Wald, principal at Squire Patton Boggs. But Uncle Sam
is unlikely to chase these people down, he added. “The tax liabilities of
such individuals are likely to be quite minimal. I would imagine that it
is more expensive to monitor for these individuals than the potential
income that the Treasury are likely to receive from them.”
And therein lies the dilemma for many American parents abroad—especially
those married to someone of another nationality: Do they document their
child’s birth with American authorities, or not?
Some American parents are choosing not to. The reasons they cite are
varied. Taxation frustration is one of them. The U.S. is one of the only
nations in the world where tax is citizen-based instead of resident-based
(China, in a new push to enforce tax law for citizens working abroad, is
one of the others, along with Eritrea). Many Americans abroad—especially
those without plans to return to America—worry that if their children
acquire U.S. citizenship and never set foot in America, they will still be
required to report all earnings to the IRS and pay American taxes for
their entire lives.
Pierce, who asked that his last name not be used, left the U.S. in 1992
and currently lives in the U.K. His children were born there and he and
his Swedish-Swiss-Italian wife applied for their children to have British,
Swedish, and Swiss citizenship. Missing from his children’s pile of
passports are American ones.
“I wish that it was not this way, but on balance, unless living and
working in the U.S., being an American citizen is a burden not a benefit,”
he said in an email exchange. “This is exacerbated by the increasingly
draconian annual reporting and filing requirements for Americans abroad.”
Other Americans abroad registered their children as U.S. citizens only to
question their decision later, especially after passage of the Foreign
Account Tax Compliance Act, which requires U.S. residents and overseas
residents to report certain foreign bank accounts or face penalties.
Kristin Louise Duncombe, an American living in France who is married to an
Argentinian-Italian citizen, said she registered her kids’ U.S.
citizenship without thinking twice.
“I wanted the kids to have U.S. nationality for emotional reasons. I mean
how could they not be American if I am?” she said in an email. “That said,
I am starting to wonder if it is not going to be a huge burden for them.
So far my kids have never spent more than about three weeks per year in
the U.S. and will not go to university there as we cannot afford it. But I
am aware because of what I go through every year that as soon as they are
independent adults they will be subjected to all this ridiculous taxation
and tax reporting.”
An American woman who didn’t want to be named and who lives in Zurich with
her dual Swiss-German husband, said the American friends she consulted
advised her not to apply for a U.S. passport for her daughter unless there
was a specific need. “My ancestors gave up everything to move to the U.S.
in the late 1800s and here I am back in Europe and not giving my daughter
the right to be a U.S. citizen, a right that others have risked their life
or even died to have,” she said. “Seems a bit strange but it just doesn’t
make sense for us in the moment.”
Other Americans abroad apply for their children’s U.S. citizenship without
hesitation. Charles Schwalbe Garcia-Lago, an American-Spanish citizen who
lives in Spain with his American wife, said, “I want my children to have
access to both cultures and choose the one that suits them. That
possibility outweighs the negatives of double taxation. They can always
choose to give up their U.S. passport if they want.”
Formally renouncing U.S. citizenship can be costly: the current fee is
$2,350 and must be paid to the Department of State’s Consular Services.
However, between the ages of 18 and 181/2, individuals can renounce U.S.
citizenship at no cost (if they also have not been U.S. residents for 10
taxable years before relinquishment) because they are not yet considered
There may be good news in store for a small number of “accidental
Americans” such as children born abroad who are U.S. citizens by default.
President Obama’s new budget proposal, which was released Feb. 2, proposes
providing relief for certain dual citizens, including excluding them from
the exit tax. (More on how the President’s proposal relates to expatriates
American Jeremy Jacobson’s first child is due in April and he plans to
apply for an American passport immediately after his birth. Mr. Jacobson
is married to a Taiwanese citizen; they travel the world but are currently
based in Taipei. “A U.S. passport is one of the best for travel
flexibility,” he says.
Kevin Smith, an American living in Japan who is married to a Japanese
citizen, gave his children dual American-Japanese citizenship without
hesitation. The couple wanted to ensure their children would have maximum
freedom to move, live, and travel. It paid off in March 2011, when the
family was forced to flee their home in Fukushima after the earthquake and
spent the next three years living in the U.S.
“We are back in Japan now, comfortable in knowing that whether we decide
to reside in Japan permanently or go back to the U.S., our children will
be able to move freely,” Mr. Smith said.
According to Kathleen, an American living in France who asked that her
last name not be used, “It never occurred to me not to pass on my U.S.
citizenship to my child,” she said in an email. “If he decides not to ever
live in the U.S., the issue of renouncing citizenship rather than be taxed
by a country he never lived in, which offers no representation or benefits
for those taxes, might come up.”
to be honest. three days before tax filing deadline, I don't have time to read all of this, but yes. a foreign born child of usa parents would technically be a usa citizen upon birth and proper documentation. one can renounce if you want.
is this a theoretical question or one which has practical implications for you, personally? ?