Does my daughter need to file US tax forms?

Hi everyone. I am British. My daughter was born in the USA but has lived in the UK for 24 years. She is 26 now and has dual citizenship. She lives and works here in England, and as far as I know, doesn't have a US social security number. Should she be filing US tax forms? To be honest, because we live in the UK it's not something that we were even aware of until a recent conversation with a friend. Any help or advise is greatly appreciated. Many thanks.

Yes, she should be filing a US tax return.  There is a tax treaty so it's unlikely she would be double taxed but as a US citizen she does need to file taxes every year.

Ok thanks for that. She been working since she finished University, not earning much, but nevertheless working. Will there be a penalty for not filing before now, and where does she stand with not having a social security number?

She was born in the US and lived there until she was 2? Are you sure she doesn't have a SS number? Most US babies are assigned one. Did you live there at the time and file US tax returns? If you claimed her as a dependent on them, you would have had to use her SS number.

If she doesn't have one, this page might help: http://www.socialsecurity.gov/ss5doc/ss5doctext.htm#o-a-us-documents

She also would need to travel to the US on a US passport only, as it's US law that US citizens must do that. You might already know that already but just in case.

Thanks for your reply. She does have a US passport and on the one occasion she went back for a holiday last year, used it. Yes she was 18 months when I left the US. She is adopted. I have her birth certificate but absolutely no idea if she was registered for a SSN?? I wasn't working at the time and my then husband worked for a local church, so I guess he paid tax? I have read several articles on the internet that say it isn't US law to have a SSN and optional, but only being familiar with British tax laws, I have no real idea. At this point in time, my daughter has no plans to live or work in the US and considers herself British, but I'm concerned she may still be subject to US tax laws.

If she has a passport, she probably does have a social security number and she is subject to US tax laws.

Your daughter is what is commonly referred to as an "Accidental American."  She has company, Boris Johnson is one as well and has not had smooth sailing.

She may want to consider renouncing her citizenship.  Unfortunately there is a cost involved (I believe it's around $450) and she needs to be current on her tax filing, but then she would not have to have any concerns of dual taxation, passports, etc., for the rest of her life.

There is an income threshold that requires a US citizen to file a tax form, but your daughter needs to get her US tax situation sorted out. There are certain UK investments and pensions that are not simple to deal with wrt US taxes and then there are the forms she must submit to declare her ownership of foreign accounts. AS a US citizen she must get in full compliance with US tax laws.

If she intends to live outside the US permanently she will always have to deal with the issues of being a US expat. There is the advantage of being able to live and work in the US if she has a US passport, but she might also consider giving up her US citizenship to simplifier her life, but she can only do that if she is up to date with her US taxes.

Hello, Helscam1. I'm sure this must have come as a surprise to you.

You have received some very good information so far. If you are not aware, there is a publication on the IRS site which will help. Search for Publication 54.

Unfortunately, US Citizenship comes with obligations no matter where in the world the citizen lives. It's fairly unique in what it requires. Those obligations remain in force forever as long as the person is a US citizen.

As has been noted, your daughter's future financial planning will be impacted by her US citizenship. Quite simply, her US responsibilities will determine her future actions on investments, possibly pensions, and even simple bank accounts. It should also be noted if she ever wishes to take advantage of any UK benefits, these might also need to be reported. A profit from the sale of a UK property, if sufficient, may also be taxable by the US even though it is tax free in the UK. If she has a non-US partner, any joint accounts might require reporting and the partner should be made aware of this.

Something that is seldom talked about, but due to your daughters age, is registering for the Draft. I know nothing about this, so I'll leave it to others to point out my possible error on this. I only mention it since your daughter may wish to pursue advanced education in the States. Financial assistance may be restricted if the person has not registered for the Draft.

For those with a long US Residence before moving abroad giving up US citizenship requires a great deal of consideration. In your daughters case, it will come down to a consideration of maintaining an option to live in the States at some time in the future. A very subjective and personal decision. But again, as long as she is a US Citizen, she should attempt to abide by the rules going forward.

You have mentioned she has a US passport. Read the fine print in the passport. It explains that as a US citizen she must file tax and information returns.

Women do not register for the draft in the United States.

Women do not register for the draft in the United States.

Solves that problem then. 

Whatever happened to equality?

Women were just recently allowed to be considered for combat roles in the US.  It is expected the draft might start to include women in the future, but currently, the requirement hasn't changed.

At the time she was born babies did not automatically need a SSN - it wasn't until 1987 that one was needed to claim a dependent, and to begin with it was just for those 5 and older (during the late '80s and early '90s it was gradually phased in to where you need one to claim any child except one that died just shortly after birth). Before that some people did not get a SSN until they started working.

ETA: The reason for that change was that before some people were claiming fictitious dependents, and requiring a SSN ensured that anyone being claimed was a real person.

Women were just recently allowed to be considered for combat roles in the US.  It is expected the draft might start to include women in the future, but currently, the requirement hasn't changed.

If someone were to challenge the issue in the courts the all-male requirement would likely be struck down now, since the basis for upholding that only males need to register was that women did not participate in combat.

Yes, your daughter would definitely need to file US taxes and get back on track (whether she wants to remain a citizen or renounce, either way she must be up to date to do so).

Fortunately, she is in a very common situation, and one that is "easily" taken care of (depending on how much you like paperwork, it may not be as easy, in which case you should hire an expat accountant to take care of it).

There are regulations now in place for her to file the last three years of taxes and six years of FBAR (needed if she has more than 10K in foreign accounts), and be considered up to date. Best of all, if she does not owe anything in US taxes (which she likely will not given the already high tax rates in the UK), she does not have to worry about fines or penalties (as those are based on monies owed).

There really has never been a better time to get on track. Also, with the new FATCA regulations coming into play, it is best to get caught up as soon as possible.

Best of luck!

The Greenback Expat Tax Team