Accidental American wanting to start company with friend

Hi All,

I'm an accidental American, I've only been to the states on holiday once for a couple of weeks, but have citizenship through my mother.

I have never filed taxes and don't intend to. My wife is not a US citizen, which is convenient as all our savings are in her name.

I want to start a business with a friend. I have heard that being a US citizen makes this very complicated with regards to tax. Myself and the guy I'm wanting to start it with are very nervous about this in case the IRS ever discover me. Would it be possible to register the business with my wife as the sole owner of our (controlling 75%) share of the business, and myself just working as an employee or some sort of director? Would that arrangement have any tax implications if the IRS ever discovered me? Is there anything I should be aware of?

I don't really want to renounce my citizenship, but feel like I may have to over this We wouldn't really lose any money as we're not wealthy at all, but it is still a part of who I am. Also a hugely stressful process it seems.

Thanks,

Edit: I just read article. Sorry I can't add links so I've screenshotted the article.

and


This makes me think that I am okay to do what I planned.

Having everything in your wife’s name may be a good idea, and you could be an employee of the business rather than a business partner. You’d still need to take advice on participating in any pension plan the business may set up.

It was hard work getting US citizenship but once our daughter leaves the USA I plan on giving it up. Far too many financial restrictions as a USC living abroad for my liking.

Having everything in your wife’s name may be a good idea, and you could be an employee of the business rather than a business partner. You’d still need to take advice on participating in any pension plan the business may set up.

That does sound like an additional complication I'd totally not thought of. Thanks. Automatic enrollment in a pension scheme is a legal requirement for employees I think. Maybe it would be even safer for myself to work as a contractor for the business, rather than be directly employed.

That does sound like an additional complication I'd totally not thought of. Thanks. Automatic enrollment in a pension scheme is a legal requirement for employees I think. Maybe it would be even safer for myself to work as a contractor for the business, rather than be directly employed.

My son is a USC working here and as long as he only contributes up to the company match he doesn’t have to declare a Foreign Grantor Trust to the IRS. (I am retired no am done with pension contributions) He does have to include the company pension contributions to the IRS for taxation each year when he files his taxes, they are not tax free by default in the USA for USCs living abroad.

Presumably you are currently filing US tax returns each year as required so maybe know something of this already.

I'm not filing taxes, and never have. By the time I realised that I needed to last year, it would have been complicated/expensive to start and I was scared of making mistakes. I may at some point start, but it's more likely I'll keep my head firmly buried in the sand on this one. Frankly, I have enough stress and expenses in my life to worry about the US gov totally unnecessarily adding more. Recently became a parent and all 

So no, I don't really know the ins and outs of UK pension declarations to the US. It's more a case of if the IRS ever found out about me, how they would view my income etc.

I'm not filing taxes, and never have. By the time I realised that I needed to last year, it would have been complicated/expensive to start and I was scared of making mistakes. I may at some point start, but it's more likely I'll keep my head firmly buried in the sand on this one. Frankly, I have enough stress and expenses in my life to worry about the US gov totally unnecessarily adding more. Recently became a parent and all 

So no, I don't really know the ins and outs of UK pension declarations to the US. It's more a case of if the IRS ever found out about me, how they would view my income etc.

As well as breaking US law by not declaring your income you also broke the law by entering the USA on a foreign passport. All USCs are required to enter and leave using a US passport. Boris Johnson famously fell afoul of this law in 2006 while traveling with his family to Mexico, changing planes in Houston with no overnight stop. Unfortunately for him his UK passport states place of birth as New York City which was a dead giveaway that he was a USC. The airline, for fear of large fines by the USA, denied him the right to board and he had book another flight that didn't go via the USA, meeting up with his wife and children in Mexico City. Another US quirk is that all international passengers have to go through passport control even they are transfer passengers.

https://www.boris-johnson.com/2006/08/29/american-passport/

As well as breaking US law by not declaring your income you also broke the law by entering the USA on a foreign passport. All USCs are required to enter and leave using a US passport. Boris Johnson famously fell afoul of this law in 2006 while traveling with his family to Mexico, changing planes in Houston with no overnight stop. Unfortunately for him his UK passport states place of birth as New York City which was a dead giveaway that he was a USC. The airline, for fear of large fines by the USA, denied him the right to board and he had book another flight that didn't go via the USA, meeting up with his wife and children in Mexico City. Another US quirk is that all international passengers have to go through passport control even they are transfer passengers.

https://www.boris-johnson.com/2006/08/29/american-passport/

First of all, mind blown!  I had no idea Boris was technically American.  Natural-born accidental American!  He could be president of the US!  He's eligible!  Shocking!

But secondly, he wrote in that blog entry, "Imagine if we told all British-born Americans that they could not arrive in this country except by use of a British passport."  I thought British (regardless of place of birth)  were required to arrive in the UK on our British passports...?  Is he completely lacking?  He held a US passport at one point.  He knew he was dual American-British nationality.  I don't understand his point.

First of all, mind blown!  I had no idea Boris was technically American.  Natural-born accidental American!  He could be president of the US!  He's eligible!  Shocking!

But secondly, he wrote in that blog entry, "Imagine if we told all British-born Americans that they could not arrive in this country except by use of a British passport."  I thought British (regardless of place of birth)  were required to arrive in the UK on our British passports...?  Is he completely lacking?  He held a US passport at one point.  He knew he was dual American-British nationality.  I don't understand his point.

He was born in NYC while his father was in Puerto Rico as an ambassador and had a US passport as a child however he had no idea of the laws binding USCs including citizenship based taxation or requirement to enter and leave on your US passport. The UK prefer UKCs to enter on a British passport but it is not binding, unlike Australia. The US became more strict with the requirement after 9/11 I believe.

It took Boris a good few years to renounce his US citizenship as he had to make good on all his US taxes owed, which was a lot, him being a rich git. It wasn’t until 9 years after he said he was going to renounce that he finally did, paying  US taxes owed on the sale of a house of his in London.


https://www.bbc.co.uk/news/uk-politics-30932891

The Financial Times reports, on the size of the tax bill, that the mayor's "allies say it is nowhere near the £100,000 estimated by some tax experts".

So if you caught up on filing through the streamline process, you wouldn’t have any costs or worries.

You’d actually get money from the US government each year as child tax credits plus the stimulus money.  To renounce citizenship you have to be caught up on your taxes anyway.  May as well get the financial benefit of filing, which will easily cover the cost of renouncing if you chose that route.

Maybe it would be even safer for myself to work as a contractor for the business, rather than be directly employed.

  You should certainly talk to an account if you want to do this.  Or you can go to https://www.contractoruk.com/forums/  for specialist advice on contracting here. 

So if you caught up on filing through the streamline process, you wouldn’t have any costs or worries.

You’d actually get money from the US government each year as child tax credits plus the stimulus money.  To renounce citizenship you have to be caught up on your taxes anyway.  May as well get the financial benefit of filing, which will easily cover the cost of renouncing if you chose that route.

My son isn't a US citizen, I wasn't born in the states so I don't think he qualifies for citizenship. And there were a fair few complications that meant we would have been on the hook for some tax. Recently bought our first house and used a HTB ISA. The 25% bonus would have been taxable. If I do decide to come into compliance it'll be after sufficient years have passed till those factors aren't relevant any more. Regardless, even if I was to gain some financial gain (which I wouldn't I think), I honestly don't know if I could handle the stress/anxiety of taking the leap.

As well as breaking US law by not declaring your income you also broke the law by entering the USA on a foreign passport.

The one or two times I've been to the states has been on an American passport when I was a child. It expired years ago, and I won't be renewing it. If that means I can never travel to the states then so be it.
With regards to breaking US law, if I'm going to choose a law to break, well, I'll go with one of the most unjust and outrageous incursions into my financial life, from a foreign entity who has zero business there.

  You should certainly talk to an account if you want to do this.  Or you can go to https://www.contractoruk.com/forums/  for specialist advice on contracting here. 

Thanks for the tip. I'll have alook.

My son isn't a US citizen, I wasn't born in the states so I don't think he qualifies for citizenship. And there were a fair few complications that meant we would have been on the hook for some tax. Recently bought our first house and used a HTB ISA. The 25% bonus would have been taxable. If I do decide to come into compliance it'll be after sufficient years have passed till those factors aren't relevant any more. Regardless, even if I was to gain some financial gain (which I wouldn't I think), I honestly don't know if I could handle the stress/anxiety of taking the leap.
The one or two times I've been to the states has been on an American passport when I was a child. It expired years ago, and I won't be renewing it. If that means I can never travel to the states then so be it.
With regards to breaking US law, if I'm going to choose a law to break, well, I'll go with one of the most unjust and outrageous incursions into my financial life, from a foreign entity who has zero business there.
Thanks for the tip. I'll have alook.

I think you’ll find that  your son is a US citizen as he was born to a US citizen.  Our  children were aged 16 and 17 when we became Naturalized US citizens and the judge at the ceremony told us they were (our son came to the ceremony with us and the judge asked him to lead us in the pledge of allegiance). To get their US passports they had to include our Naturalization certificates as proof they were minors when we Naturalized.

Best of luck to you staying off the radar,  I completely agree with you about how unfair it is.  Note that when opening new bank accounts you will be asked if you are a US citizen, and if so will be asked to complete an IRS form W4(?), as financial institutions are required to report income of USCs to the IRS. When I applied for my UK pension a couple of years ago from my old  UK employer I was also asked if I was a USC.

I think you’ll find that  your son is a US citizen as he was born to a US citizen. 

I don't think I can pass on my citizenship as I don't pass the physical presence test, also given I wasn't born in the states.

I'm just hoping that at some point the US gov will see sense (and the ever growing number of people renouncing) and change the rules.

The child of the OP is NOT an American citizen. He cannot be claimed as a tax deduction.

https://uk.usembassy.gov/u-s-citizen-services/birth/transition-requirements/

A child born outside of the United States and in wedlock to a U.S. citizen parent and a non U.S. citizen parent, may acquire U.S. citizenship at birth if the U.S. citizen parent has been physically present in the United States or one of its outlying possessions for a period of five years, two of which were after the age of fourteen.  The U.S. citizen parent must be the genetic or the gestational parent, and the legal parent of the child under local law at the time and place of the child’s birth.

I'm just hoping that at some point the US gov will see sense (and the ever growing number of people renouncing) and change the rules.

That's the hope of every expat. 
Just don't underestimate the stress of living with this on your shoulders now you actually know what your obligation is under the law.