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Where Taxpayers and Advisers Meet

Tax Residency

ConcernedMum
Posts:3
Joined:Tue Feb 25, 2020 12:25 pm
Tax Residency

Postby ConcernedMum » Tue Feb 25, 2020 12:30 pm

My daughter was born in USA and has USA citizenship. Lived in UK since age 1 and has British Citizenship (certificate). Now has the tax residency letter to complete from her bank. Will she have to pay US tax on her UK earnings even though she is not US resident and has never lived or worked in the US?
Thank you :-)

darthblingbling
Posts:698
Joined:Wed Aug 02, 2017 9:09 pm

Re: Tax Residency

Postby darthblingbling » Tue Feb 25, 2020 2:47 pm

US citizens are considered tax residents in the US wherever they reside.
How old is your daughter and what does she do?

ConcernedMum
Posts:3
Joined:Tue Feb 25, 2020 12:25 pm

Re: Tax Residency

Postby ConcernedMum » Tue Feb 25, 2020 3:09 pm

How unfair is that ... She's 33 and is a physio

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Tax Residency

Postby maths » Tue Feb 25, 2020 6:55 pm

The US levy tax based on citizenship. Thus a US citizen is exposed to US tax on their worldwide income.

However I believe US citizens living abroad are eligible for a foreign earned income exclusion which allows expats to exclude up to $105,900 of their earned income.

This may mean that your daughter is not in fact liable to US Tax and may not need to file a US tax return. If their is a US tax charge any U.K. tqx can be credited against the US tax charge.

ConcernedMum
Posts:3
Joined:Tue Feb 25, 2020 12:25 pm

Re: Tax Residency

Postby ConcernedMum » Tue Feb 25, 2020 8:15 pm

Thank you. She doesn't earn that much so hopefully she'll be okay. Fingers crossed!

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Tax Residency

Postby maths » Tue Feb 25, 2020 10:05 pm

The US IRS are a nightmare and think they have the right to levy tax on everybody in the whole world. What’s new.

There is a US contributor on this site who I’m sure will add his own informed opinion.

Think about renouncing US citizenship !

DavidTreitel
Posts:271
Joined:Thu Aug 16, 2012 4:31 pm

Re: Tax Residency

Postby DavidTreitel » Wed Feb 26, 2020 10:18 am

Great question. Most folks would use the official IRS Streamlined Foreign Offshore Procedures (SFOP) to catch up. https://www.irs.gov/individuals/international-taxpayers/u-s-taxpayers-residing-outside-the-united-states. We have successfully filed many, many hundreds of returns through these procedures.

if your daughter might like friendly, helpful professional advice, it is worth mentioning that we have an excellent qualified team, able to help with US and UK tax; and meet with her if she’d like to put a face to the name. The folks here at our office here in London include people with American CPA and Enrolled Agent and UK Chartered Tax Adviser and accounting qualifications. We'd be delighted to chat with her about the options open to her, whether or not she chooses to work with us. david.treitel@americantaxreturns.co.uk (Telephone 020 3542 6330)

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Tax Residency

Postby maths » Wed Feb 26, 2020 1:16 pm

I think the poster would appreciate some guidance/advice not just being told about your firms services. The former is the purpose of this site.

I attempted to proffer some guidance and assumed in my reference to you that you would comment on that.

DavidTreitel
Posts:271
Joined:Thu Aug 16, 2012 4:31 pm

Re: Tax Residency

Postby DavidTreitel » Thu Feb 27, 2020 9:41 pm

My apologies if I was not clear. The advice part is the first part of my reply. Most folks would use the official IRS Streamlined Foreign Offshore Procedures (SFOP) to catch up. https://www.irs.gov/individuals/international-taxpayers/u-s-taxpayers-residing-outside-the-united-states


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