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Old 09-08-2019, 02:50 PM
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Renouncing U.S. citizenship?


Has anyone here ever renounced their US citizenship? Our situation: I am American, born in the USA. Married 20 years, spouse is not from the US, but has US citizenship and works for a US company. We have 2 teens, both US citizens and citizens in spouse's home country.

We've been living in Europe as ex-pats for 3+ years. The kids will probably have the opportunity to attend uni in Europe, in spouse's home country, or in the USA. We generally no longer consider the US to be "home" and would prefer the kids not go to uni there. Our only family in the US are my parents, in their 80s, and my siblings and their kids. All other family in Europe or Australia.

As many of you know, the US is one of the only places that requires people outside the country to continue to pay US taxes while also paying the taxes of the local country where they work and reside. It's very expensive. It is my understanding that even if one were to renounce US citizenship, there are heavy tax penalties. We are realising that even if our kids don't go to uni in USA and even if they never live in the USA, they will be forced to pay US taxes for the rest of their lives. We are seriously considering the possibility of their renouncing US citizenship before they are old enough to work.

Anyone have any info or advice?
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Old 09-08-2019, 03:11 PM
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WSJ "IRS Gives Tax Break to Some American Expatriates"


https://www.wsj.com/articles/irs-giv...es-11567797689
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Old 09-08-2019, 04:22 PM
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Since this is looking for advice and experiences, let's move it to IMHO (from GQ).

Factual information about tax rates and other issues is of course still welcome.
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Old 09-08-2019, 05:15 PM
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My husband had dual citizenship with the US and Mexico until he was 18. He renounced the Mexican citizenship at that time. There have been no ill effects from doing so. If I recall correctly, he told me that legally he had to choose at that time. In other words, he wouldn't be allowed to maintain dual citizenship as an adult. I'm not sure what the laws are now.

If your kids have citizenship in another country, and you all consider it home, then I think they should renounce the US citizenship. As you say, there are tax penalties to consider. I see no benefit to them retaining the American citizenship.

It also sounds like you should pursue citizenship in this country.
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Old 09-08-2019, 05:32 PM
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Originally Posted by wombattver View Post

As many of you know, the US is one of the only places that requires people outside the country to continue to pay US taxes while also paying the taxes of the local country where they work and reside. It's very expensive. It is my understanding that even if one were to renounce US citizenship, there are heavy tax penalties.
You do know that you can get credit on your U.S. tax return for income taxes paid in a foreign country, right? Depending on the country where you are living, you may very well pay taxes that are already high enough that you won't owe any additional U.S. tax.

Quote:
We are realising that even if our kids don't go to uni in USA and even if they never live in the USA, they will be forced to pay US taxes for the rest of their lives. We are seriously considering the possibility of their renouncing US citizenship before they are old enough to work.
The U.S. government's current position is that one cannot renounce U.S. citizenship on behalf of a minor.

(I am not remotely a tax expert, but I have spent 20+ years as an immigration paralegal and see clients run into these issues all the time. It's a very messy area of law, and if you haven't already done so, you should find someone who specializes in U.S. expat tax and immigration issues to get advice specific to your situation.)

Eva Luna, U.S. Immigration Paralegal
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Old 09-09-2019, 04:38 AM
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You do know that you can get credit on your U.S. tax return for income taxes paid in a foreign country, right? Depending on the country where you are living, you may very well pay taxes that are already high enough that you won't owe any additional U.S. tax.
The equivalent was the case for me when I lived in the US: there was a specific treaty by which I did my taxes in the US (with a specific basic deduction marked by the treaty and equivalent to Spain's basic deduction) and informed the Spanish government that I was in the US (so, no filing in Spain). For a US citizen it may be easier to always file in the US, if the country where they live follows the "no dual filing" principle rule (most if not all EU members do). I know several Americans with dual Spanish citizenship who do exactly this.

Dual citizenship has important advantages: if I'd had it, my stays in the US would have involved a lot less paperwork and hassle. They would have been equivalent to what I have to do any time I go to another EU country, which is "pack my bags and go".
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Last edited by Nava; 09-09-2019 at 04:40 AM.
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Old 09-09-2019, 06:07 AM
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Thanks for the replies. The WSJ article doesn't really apply to us as it is more about tax forgiveness and possible tax credits. We do take advantage of any tax credits for which we qualify and do not owe any back taxes. I think one of the difficulties is also that he works for a US company, so although we live and work in Switzerland, his salary is from the US. So, like it or not, he and I will not renounce our US citizenship. To get citizenship here requires living here for at least 10 years, so we'd have a while to go. Dual citizenship does have some advantages, but being saddled with taxes forever to a country where you don't live or work is a huge disadvantage.

Americans living abroad are taxed on everything, even though they also pay taxes in their country of residence, even if they never set foot in the US again. Eritrea is the only other country that does this. In fact, my husband bought a house in Australia years before we even met. He rented it out for a while and then his dad lived in it for 12 years. He sold that house, 18 years later. By this time, we were married, had kids and he was a US citizen. 80K was our tax bill from the US! For a house he owned long before he ever became a citizen... I was never even on the deed to the house.

I know I can't renounce citizenship for the kids, but I'm gathering info on whether it would be wise for them to do so when they turn 18. They would still have passports for at least one other country, and maybe two. (Or even 3 - my son was adopted from Russia, so he's got Russian citizenship at least until he's 18 as well!) And even though the US says it doesn't "recognise" dual citizenship they have no jurisdiction to make someone surrender their passport from another country.

The company has a great tax firm that helps with / does the tax filing for the US and for here. We are setting up an appointment with an immigration expert who can hopefully advise us on what makes the most sense for the kids.

Any more info or advice is appreciated, so please continue to post if applicable!
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Old 09-09-2019, 06:27 AM
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I think one of the difficulties is also that he works for a US company, so although we live and work in Switzerland, his salary is from the US.
You may want to get that checked, and I say that because I'm literally not sure what's the case. It may be illegal to have him counted as "a US worker on location in Switzerland" for periods above a certain limit. In the EU it would be illegal above two years but CH is not an EU member.
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Last edited by Nava; 09-09-2019 at 06:28 AM.
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Old 09-09-2019, 06:31 AM
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Originally Posted by wombattver View Post
I know I can't renounce citizenship for the kids, but I'm gathering info on whether it would be wise for them to do so when they turn 18. They would still have passports for at least one other country, and maybe two. (Or even 3 - my son was adopted from Russia, so he's got Russian citizenship at least until he's 18 as well!) And even though the US says it doesn't "recognise" dual citizenship they have no jurisdiction to make someone surrender their passport from another country.

Maybe I've missed something- but there any reason why your kids would have to renounce at 18 rather than waiting until they've finished college, started working and have a better idea of the impact it will have on them?


It seems they will get credit toward US income taxes for the income taxes paid in Switzerland - I mean it's possible that the Swiss taxes wouldn't basically eliminate the US one, but I can't imagine the Swiss taxes would be drastically lower than US Federal taxes. You and your husband are retaining your US citizenship for some reason - you because you have no other, but presumably your husband remains a citizen of his home country. Perhaps the same reason your husband is retaining his US citizenship will apply to your kids.

Last edited by doreen; 09-09-2019 at 06:33 AM.
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Old 09-09-2019, 07:58 AM
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I've been living in the UK for over 20 years and had dual US/UK citizenship for a long time. About 5-6 years ago I renounced the US citizenship. This was mainly due to FATCA, the US law that requires foreign financial institutions to report on all their US customers. Due to this some European financial institutions simply refuse to take on American customers. I wanted to make some investments for retirement so found a financial planner. The only offering he had available to US citizens had averaged about a 2% return over the past couple years. Once I'd renounced I was able to invest in one that was making about 8%.

I had no tax penalties to pay, just the fee of around $2500. I think at the time the penalties came into effect if your net worth was over $2 million.

Here's a good article on FATCA from the BBC
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Old 09-09-2019, 08:52 AM
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For me the FATCA is just a royal PITA. I always file US tax returns and never owe a cent on account of foreign tax credit. Ironically, the main reason Canadian taxes are some much higher is to pay for medicare.
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Old 09-09-2019, 10:23 AM
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Maybe I've missed something- but there any reason why your kids would have to renounce at 18 rather than waiting until they've finished college, started working and have a better idea of the impact it will have on them?


It seems they will get credit toward US income taxes for the income taxes paid in Switzerland - I mean it's possible that the Swiss taxes wouldn't basically eliminate the US one, but I can't imagine the Swiss taxes would be drastically lower than US Federal taxes. You and your husband are retaining your US citizenship for some reason - you because you have no other, but presumably your husband remains a citizen of his home country. Perhaps the same reason your husband is retaining his US citizenship will apply to your kids.

The reason not to wait is that once they start working, they will be required to start paying both US taxes and the taxes where they live. Yes, the Swiss taxes might cancel out the US ones for the kids, but maybe not. We pay high taxes for both. For us to relinquish, the penalty would be another 6 years of paying US taxes.
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Old 09-09-2019, 10:27 AM
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I've been living in the UK for over 20 years and had dual US/UK citizenship for a long time. About 5-6 years ago I renounced the US citizenship. This was mainly due to FATCA, the US law that requires foreign financial institutions to report on all their US customers. Due to this some European financial institutions simply refuse to take on American customers.

I had no tax penalties to pay, just the fee of around $2500. I think at the time the penalties came into effect if your net worth was over $2 million.

Here's a good article on FATCA from the BBC
In Switzerland, only one bank here would take on US customers. Unfortunately, I think things have changed regarding your penalty fee of $2500. We've been told we would have to continue paying US taxes for at least 6 years. Or maybe the $2500 penalty would apply to the kids, since they won't have much net worth. I'll have to look into that further.

Last edited by wombattver; 09-09-2019 at 10:27 AM.
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Old 09-09-2019, 10:46 AM
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We've been properly reporting, filing, and paying taxes in the US the entire time we've been here. The US tax rate is higher than the Swiss taxes, for us. For example, if the Swiss taxes are 20K and the US taxes are 30K, we pay 20K Swiss and 10K to the US. Again, this is not about us relinquishing or trying to avoid US taxes (I firmly support that we pay taxes for the greater good and so should we. We are very fortunate.) It's just that we don't want the kids to be overly burdened for many years into the future, especially if they choose to never go back to the US.
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Old 09-09-2019, 10:55 AM
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You may want to get that checked, and I say that because I'm literally not sure what's the case. It may be illegal to have him counted as "a US worker on location in Switzerland" for periods above a certain limit. In the EU it would be illegal above two years but CH is not an EU member.
Thanks. We found out today that by CH rules, we can be here as residents for 10 years. At 5 years, you have to switch to a local contract rather than remain an ex-pat. And I'm not sure if the "5 years" is a CH law, a canton law, or company policy. Waiting to get clarification on that.
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Old 09-09-2019, 10:59 AM
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We've been properly reporting, filing, and paying taxes in the US the entire time we've been here. The US tax rate is higher than the Swiss taxes, for us. For example, if the Swiss taxes are 20K and the US taxes are 30K, we pay 20K Swiss and 10K to the US. Again, this is not about us relinquishing or trying to avoid US taxes (I firmly support that we pay taxes for the greater good and so should we. We are very fortunate.) It's just that we don't want the kids to be overly burdened for many years into the future, especially if they choose to never go back to the US.
but what if they do? pushing them into giving up their citizenship before they know what it is they want to do with their lives doesn't sound like a real good idea.
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Old 09-09-2019, 12:59 PM
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In Switzerland, only one bank here would take on US customers. Unfortunately, I think things have changed regarding your penalty fee of $2500. We've been told we would have to continue paying US taxes for at least 6 years. Or maybe the $2500 penalty would apply to the kids, since they won't have much net worth. I'll have to look into that further.
The $2500 wasn't a penalty, it was simply a paperwork fee. From the BBC story -
Quote:
Originally Posted by BBC
For people like her the only option is to renounce their citizenship, and this is causing such a backlog of paperwork that in November, the fee for renunciation was put up to $2,350 - an increase of about 400%.
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Old 09-09-2019, 01:26 PM
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Ugh, filing two tax returns. As a dual CND/US living in Canada I file to the IRS every year and haven't had to pay extra due to the foreign income exclusion (currently $105,900 USD). When I convert that to Canadian it is about $138,000 CAD. Since I'm filing jointly with my US wife we have a total household income credit of $275,000 CAD. If we were to make over that amount we could be double taxed on the amount over. However my understanding is that we could alternatively try apply the foreign tax credit where we could see if the CAD taxes are more than the US taxes - then wouldn't have to pay anyways.

Other than a huge pain in the ass isn't this just a problem for the very wealthy and lottery winners? There are likely other scenarios - I do know a dual farmer who gave up his US citizenship to facilitate giving his farm to children as inheritance. I monitor the situation and would give up the US Citizenship if I thought it would become costly. I keep it mainly because I would like the option to move and live close to my dual Canada/US children if they ever decide to move and reside in the US.

Such a pain to file it though. I had thought removing this stupid requirement was the one single Trump campaign point I could get behind (now a broken promise of course). Not sure why Trump didn't follow through with it as it would surely benefit his wealthy friends.
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Old 09-09-2019, 01:37 PM
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but what if they do? pushing them into giving up their citizenship before they know what it is they want to do with their lives doesn't sound like a real good idea.
Think about this carefully. It is a permanent decision.Once you give up US citizenship, you can never get it back.

People without citizenship can't just fly to the US whenever they feel like it.
You'll have to apply for permission to enter the country--i.e get a visa.
Now,Switzerland is on the list of"visa waiver" countries,meaning that Swiss citizens don't need a visa. But Russia is NOT on the list, so if your son is Russian, he may have to apply for a visa.

The process of applying is not simple. You have to have a personal meeting with somebody at the US embassy, and you have to prove that you are not going to overstay your visa. You need to provide proof that you have motivation to return home, before they will give you permission to stay in America for a few weeks. You have to prove that you have a full time job with a serious commitment to your career prospects, or that you own a house and are raising a family ,etc. So a 20 year old student who is unemployed and wants to visit the US for a summer vacation will often be denied entry.

Also, as the paralegal expert Eva Luna mentioned above--immigration is a very messy area of law. Basically, there are no laws involved...there are mostly regulations issued by various government agencies, and those regulations can change quickly.( For example, Trump made things more difficult for certain nationalities, and he did so simply by changing the regulations overnight on his whims. No long complex legal procedures necessary. )
Right now, you would probably not have any problems.But it is easy to imagine that the rules will change. Perhaps in the future, anyone who intentionally renounced American citizenship could find himself on a list of "potentially undesirables".

Citizenship carries both advantages (freedom of movement), and disadvantages(those damn taxes)
Weigh your decision very,very carefully.
And get professional advice.









(also--one nitpick:
Quote:
Eritrea is the only other country
that taxes its citizens abroad.
Not true: In addition to the USA, there is one more country that does the same thing:
North Korea )

Last edited by chappachula; 09-09-2019 at 01:39 PM.
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Old 09-09-2019, 01:44 PM
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Ugh, filing two tax returns. As a dual CND/US living in Canada I file to the IRS every year and haven't had to pay extra due to the foreign income exclusion (currently $105,900 USD). When I convert that to Canadian it is about $138,000 CAD. Since I'm filing jointly with my US wife we have a total household income credit of $275,000 CAD. If we were to make over that amount we could be double taxed on the amount over. However my understanding is that we could alternatively try apply the foreign tax credit where we could see if the CAD taxes are more than the US taxes - then wouldn't have to pay anyways.

Other than a huge pain in the ass isn't this just a problem for the very wealthy and lottery winners? There are likely other scenarios - I do know a dual farmer who gave up his US citizenship to facilitate giving his farm to children as inheritance. I monitor the situation and would give up the US Citizenship if I thought it would become costly. I keep it mainly because I would like the option to move and live close to my dual Canada/US children if they ever decide to move and reside in the US.

Such a pain to file it though. I had thought removing this stupid requirement was the one single Trump campaign point I could get behind (now a broken promise of course). Not sure why Trump didn't follow through with it as it would surely benefit his wealthy friends.
I think the biggest issue would be that it's contrary to Trump's "nationalistic" point of view.
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Old 09-09-2019, 03:04 PM
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The reason not to wait is that once they start working, they will be required to start paying both US taxes and the taxes where they live. Yes, the Swiss taxes might cancel out the US ones for the kids, but maybe not. We pay high taxes for both. For us to relinquish, the penalty would be another 6 years of paying US taxes.
Other people have addressed my main point of "what if your kids later decide to go back to the US? " but I don't understand this- if you and your husband relinquish your US citizenship now , the penalty will be to pay US taxes for another six years? Aren't you paying US taxes now and won't you be paying them for the next six years even if you don't relinquish your US citizenship?x?
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Old 09-09-2019, 03:39 PM
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but what if they do? pushing them into giving up their citizenship before they know what it is they want to do with their lives doesn't sound like a real good idea.
That was my thought too- even if they can have their citizenship renounced before they're adults, that's probably something they should decide for themselves.
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Old 09-09-2019, 03:51 PM
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Ugh, filing two tax returns. As a dual CND/US living in Canada I file to the IRS every year and haven't had to pay extra due to the foreign income exclusion (currently $105,900 USD). When I convert that to Canadian it is about $138,000 CAD. Since I'm filing jointly with my US wife we have a total household income credit of $275,000 CAD. If we were to make over that amount we could be double taxed on the amount over. However my understanding is that we could alternatively try apply the foreign tax credit where we could see if the CAD taxes are more than the US taxes - then wouldn't have to pay anyways.

Other than a huge pain in the ass isn't this just a problem for the very wealthy and lottery winners?
IRS paperwork being a huge pain in the ass is enough reason if there are no other tangible benefits in a specific situation to being a US citizen. And FTR, all Canadian lotteries that I know of, certainly the government-run ones, are tax-free. The amounts are also paid out in a lump sum. So if you win a described prize of, say, $10 million, you actually get $10 mil and owe no tax on it, not $x per month or a lesser lump sum that is taxable, as in many US lotteries.
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Old 09-09-2019, 05:38 PM
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Other people have addressed my main point of "what if your kids later decide to go back to the US? " but I don't understand this- if you and your husband relinquish your US citizenship now , the penalty will be to pay US taxes for another six years? Aren't you paying US taxes now and won't you be paying them for the next six years even if you don't relinquish your US citizenship?x?
Again, my husband and I are not considering relinquishing our citizenship. We are not worried about the cost or penalties - we will remain US citizens and continue to pay taxes in perpetuity.

The issue is whether the kids want or should consider it.
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Old 09-09-2019, 05:54 PM
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Again, my husband and I are not considering relinquishing our citizenship. We are not worried about the cost or penalties - we will remain US citizens and continue to pay taxes in perpetuity.

The issue is whether the kids want or should consider it.
I understand that you and your husband aren't relinquishing your citizenship. But there's a reason you aren't ( or more specifically, that your husband isn't) - maybe you don't want to become a citizen of Switzerland, or maybe you want to be able to visit your parents easily or whatever the reason is that has nothing to do with costs or penalties. You aren't keeping your US citizenship because you love paying more in taxes- there's some other reason. And there no reason that can't apply to your kids - that they might have a reason to keep their US citizenship. Maybe they'll want to live with your parents for a year after college, or maybe they'll want to go to grad school in the US (which will require a visa and I wouldn't be surprised if it's difficult to get one after renouncing your US citizenship). They might even decide to go to university in the US and remain there. Your two teenage kids can't possibly know now whether they will want to give up their US citizenship - of course, they might consider it at some point but it probably shouldn't be as soon as they turn 18, before they have even finished their education.

Last edited by doreen; 09-09-2019 at 05:55 PM.
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Old 09-09-2019, 06:21 PM
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but what if they do? pushing them into giving up their citizenship before they know what it is they want to do with their lives doesn't sound like a real good idea.
We are honestly not trying to push them to do so. The idea is actually a bit worrisome. Right now, my daughter is looking into uni in Europe or the U.K. She has been amazingly fortunate to have been able to travel to over 15 countries and she sees the world very differently than we did at her age. She is at the age where she questions everything and her reactions to the world are more emotional than logical.

After spending a few weeks in the US over the summer and watching more reports of mass shootings on television, hearing her friends discuss "active shooter drills" at school, watching her cousins struggle with enormous student loan debt... she does not consider the US a desirable place. She and her friends were harassed at the local mall, confronted by religious zealots for having a rainbow flag on a backpack. She doesn't feel safe and now considers the US to be a violent and cruel country. She is a teenager and, like many teens, sees the world in black and white. She is passionate about LBGTQ rights, about gun control, about saving the planet, etc. etc. She says she never wants to go to the US again.

I've always just been American and never really considered being something else. When I was her age I didn't have a passport and had never been outside the country. She is also potentially able to apply for Swiss citizenship within 3 more years, as the 10-yr rule is not necessarily applicable for minors and students. Of course, we are not allowing her to make such decisions right now. This summer trip has brought up many new questions from her and we are just discussing things and gathering info.
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Old 09-09-2019, 06:26 PM
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In regards to needing a visa to travel to the US - we've never had any issues getting traveling visas quickly and easily - I think only Australia and Russia have required visas thus far. But we've never had to apply for a visitors visa to a country where citizenship was renounced! That would probably open a huge can of worms!!
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Old 09-09-2019, 08:50 PM
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It's very expensive. It is my understanding that even if one were to renounce US citizenship, there are heavy tax penalties.
There are penalties for avoiding tax. In particular, there may be penalties for renouncing US citizenship to avoid tax but, as I remember, renouncing US citizenship just doesn't automatically immediately remove your tax liabilities.

Also, as I remember, renouncing US citizenship to avoid tax requires more documentation.

If your kids haven't had to pay US taxes yet, the procedure for renouncing US citizenship may not involve bringing their US tax status up to date.

Some of my family have renounced citizenship. No penalties of any kind were applied. Accounting fees for some of the tax returns were heavy.
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Old 09-10-2019, 02:07 AM
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I must say, I'm still a little salty from paying the US government 80K for selling a house that my husband solely owned, in another country, before he met me. (And one that wasn't even generating income - it was a small house in which his father lived for 12 years rent-free.) Even if the kids never live in the US and buy a house in EU or AUS, the US would still have some claim to any future home they might buy/sell.

Anyway, we are not trying to avoid taxes ourselves. We are just looking into whether or not continuing citizenship for the kids is beneficial in the long run, especially if they no longer think of themselves as American and are more likely to settle in Europe or Australia.

We have time to explore this idea and will meet with immigration and tax experts down the line. Thanks, all, for sharing your insights.
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Old 09-10-2019, 02:35 AM
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Originally Posted by wombattver View Post
In regards to needing a visa to travel to the US - we've never had any issues getting traveling visas quickly and easily - I think only Australia and Russia have required visas thus far. But we've never had to apply for a visitors visa to a country where citizenship was renounced! That would probably open a huge can of worms!!
I've not had to travel to the US since renouncing so don't know if it would be any hassle at all. I go to Canada about once a year for work and always make sure to book a direct flight and not one that stops in the US just in case.
  #31  
Old 09-10-2019, 02:06 PM
wombattver is offline
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It's something for us to consider. Even if no one wants to settle in the US, they might have issues just visiting for a cousin's wedding or something like that. I've always found that visitor visas for less than 3 months are usually not a big deal but, like you, we've never had experience with visas after renouncing citizenship.

Many issues to ponder. Thanks everyone.
  #32  
Old 09-10-2019, 09:05 PM
Hari Seldon is offline
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Things have really changed since 50 years. A friend of mine left for Canada, draft notice in hand, and went immediately to the US consulate and renounced. They accepted it; it didn't cost him anything and he certainly never filed a US tax return thereafter.

I know a woman whose father was American, but never registered her birth with the consulate and she has never ever filed US tax returns. In fact she has no idea (I never asked her, but that's what her mother says) that she is supposed to. There is no way they could ever know about her since she travels on a Canadian passport.
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