Would an American who never lived in the US as an adult have to file with the IRS?

Factual Questions
1

From various threads on the topic of dual citizenship, I gather that dual citizens (US & other) have to file with the IRS, even if they live outside of the US.

Does that apply even if the US citizen has never lived in the US for any length of time? For instance, suppose a Canadian couple is in the US on student visas, and while there, they produce, um, a joint dissertation. Then they go home, taking the infant with them. Since the little one was born in the US, he’s a US citizen, even though his parents are Canadian.

When little Dissertation grows up and is earning money in Canada, does he have to file with the IRS, even if he’s not lived in the US since he was only a little footnote?

2

US citizens are taxable on their worlwide income, regardless of whether they are resident in the US or, indeed, regardless of whether they have ever set foot there.

However, there are various allowances and concession which result in the actual calculated liablity of many - not all - non-resident US citizens working out to $0.

I don’t know whether, if you have a nil liablity, you still have an obligation to file a return.

3

Technically they would be required to do so, but as a practical matter it’s unlikely they would face any consequences for not doing so, as long as they continued to live abroad. I know plenty of expat Americans who get away with not bothering.

I’d imagine an issue could arise if they took up residence in the US and began filing returns, thereby drawing the IRS’s attention to their previous evasion.

4

You might want to double check this, but I seem to remember that you don’t have to file a return unless you actually owe taxes (and those even goes for people who live within the United States). Since you live full time outside of the United States, you’re subject to a pretty good sized foreign income exclusion in addition to other normal deductions. So barring a fairly large income, and subject to verification of what I first said, it’s possible that you may legally not file a return.

5

No, you’re supposed to file even if you don’t owe anything. I’ve been doing this for the last 15 years.

In the OP’s example I’d guess that little Dissertation wouldn’t have an SSN or other national ID number and would be completely invisible to the IRS.

6

The threshold for filing is related to your income level, not the amount of tax owed.

The IRS has several web pages that address filing requirements although I could not find a reference to citizenship or foreign domicile.

7

The USA just made some rule changes recently, and a HUGE number of dual citizens here in Canada are all upset about it. Apparently August was the deadline to get caught up; otherwise, some serious fines kick in.

First, yes, they have to file. A lady I work with, her brother hasn’t lived in the USA since he was 5; he’s like dozens of others on the news here - he faces several $10,000 fines (or jail time) if the border guards decide to be dicks next time he visits the states. Just to find an accountant who could do his taxes on short notice (assuming he could find one) would cost thousands of dollars - all for some guy making a basic, normal living wage. Some experts have suggested writing to the IRS and asking for more time, but all this does is draw attention to yourself and commit you to spending the thousands on a tax attorney.

Apparently, one of the “gotcha’s” is reporting foreign assets (i.e. not in the USA) of greater than $100,000 if I understand the news story right, whether you owe taxes or not. Many Canadians over 40 will have 1 or 2 retirement funds (RRSP, like a IRA or 401K) that exceed $100,000. A house and or cottage will exceed that too. There’s a $10,000 fine each for not reporting such assets. Likely, the tax paid to Canada, which I understand would be deducted from tax owed to the USA, means the person would pay no income tax.

The law is supposed to nail those millionaires who secrete their cash in foreign accounts - if the country catches you hiding foreign assets, they’ll nail you and pay. But if you cross the border and the guard notices “born in the USA” on your passport, he might look you up in the US database and see you have no return filed - you screwed if he wants to be a dick. Of course, if you renounce your US citizenship now, that still does not relieve you of the prior obligations to file; it just brings you to the attention of the US authorities. The US has made no comment to clarify the situation, which does not inspire confidence in their willingness to compromise.

Finally, a lot of Canadian banks have US subsidiaries; this puts them under an obligation to cooperate with the US and reveal personal details about the finances of Canadians who may have dual citizenship (welcome to 1984); so the US will know about a dual’s savings account, mortgaged home, etc. Plus, possibly they can force the bank to turn over those assets to pay fines… USA takes your retirement savings, and you are then on the hook to pay the Canadian government the withdrawal taxes for that fund… Aren’t terrorist finance laws wonderful.

I’m sure if you google for it you can find plenty of recent Candian news stories.

8

Yes you have to file if your income is above a certain amount. This year I filed late (very late, mailed it two days ago) essentially because I had no idea how to get the forms (my printer was broken). Eventually, I discovered the IRS would mail you forms on request (although they took their time to do so). And I also filed a foreign assets form for the first time in probably 30 years. It wants all assets over $10,000, changed from $100,000. Bloody nuisance. I had no idea that property I own is considered such an asset. I will keep quiet about that one, I guess.

9

(Bolding mine.) http://www.irs.gov/businesses/small/international/article/0,,id=97324,00.html

10

For these special cases, it’s not like it’s hard to give up one’s USA citizenship. Do those cost-benefit analysis. Is having a citizenship you never use worth the hassle, then, of having to file tax returns?

(Assuming, of course, dual citizenship and not exclusive USA citizenship!)

11

However, if you attempt to give up US citizenship to avoid paying US taxes, the US Government with not recognize the attempt.

12

If the child is only an anchor baby of two foreign residents and has never been on US radar, or resided in the US as an income producer I would have to see a solid cite that the US is pursuing them for taxes to believe it.

Re the child of two ex-pat US citizens that is a different matter, and I can see how he would be a US citizen and subject to taxes unless citizenship were (somehow) formally renounced.

13

A few years ago there was a crazy immigration case in Britain regarding a man born in the states to a British GI bride. The marriage broke down, his mother divorced her husband and moved back to England (Norfolk) with her baby on her passport. He grew up there, never left the country and so never applied for his own passport. Evidently it never occured to him or his family that he was anything other than British. Following a crackdown, out of the blue, he was declared to be an illegal immigrant and given six weeks to leave the country.

Now this shouldn’t have happened, as there is a standard waiver in such cases, but someone in the Home Office was strictly applying the rules and claiming that this man, with his strong Norfolk accent and record of schooling and employment, in Britain couldn’t offer strong enough proof of his “story” – said proof being neccessary to apply the waiver. He won his appeal but I am now picturing his situation if not only had he been deported but was told on arrival that he owed a lifetime’s worth of back taxes to boot!

14

Actually everything I read and hear about this, it is hard.

15

pejorative terms aside, there is no doubt that little Dissertation in this hypothetical would be a US citizen, as set out by the 14th Amendment.

However, I agree that it would be helpful to have a citation to back up the assertion that he’s required to file with the US, even if he’s never lived there.

16

I don’t know if it’s deliberate, but you are misusing the term “anchor baby.” Anchor babies are children born to illegal immigrants in an (alleged) attempt to assist the parents in gaining US residency. Since the couple in the OP were in the country legally and left at the end of their visa terms, with their baby, calling that child an anchor baby is, well, silly.

17

Again, it was for a special case as in the OP. The purpose wouldn’t be to avoid paying taxes in my interpretation (disclaimer: I don’t professionally interpret for the IRS). It would be for the specific purpose of “spring cleaning,” i.e., getting rid of unnecessary baggage. Canadians don’t really have a need for U.S. citizenship, whereas a Mexican or Rhodesian accidentally born in the United States may want to hold onto it.

18

Wrong. You FIRST must renounce your citizenship with the US State Department. ONCE accepted, it’s forever.
Hence, it CAN be recognized.

19

Well, I’ll have a stab. Happy to be corrected by someone who knows better.

  1. USC title 26 s. 6012(a)(1)(A) provides that “returns with respect to income taxes . . . shall be made by . . . every individual having for the taxable year gross income which equals or exceeds the exemption amount, except that a return shall not be required . . .” and there follows a number of exemptions, none of which refer to non-residents. So, unless “individual” is defined somewhere in a way that excludes non-residents, it would seem that non-residents, like residents, have to file a return if their income exceeds a certain amount, unless they can bring themselves within the same exemptions that a resident can claim.

  2. Furthermore, further down in the same section, at para (c), we find this: “For purposes of this section, gross income shall be computed without regard to . . . the exclusion provided for in section 911 (relating to citizens or residents of the United States living abroad)”. So s. 6012, requiring the filing of a return, does apply to people living abroad; if it did not this provision would be meaningless.

  3. If we turn to s. 911, we find that it creates a special exclusion of foreign earned income for deduction for a “qualified individual”, defined as “an individual whose tax home is in a foreign country” and who meets certain other criteria. This tends to suggest that “individual” is not defined in a way which excludes non-residents; if it were, the category of “qualified individual” would be empty, and the exclusion provided by s. 911 would be meaningless.

So, quick-and-dirty summary: Based on what I have read so far, which is not very much:

  • There is no general exclusion which would exempt a US citizen living abroad from the s. 6012 obligation to file a return.

  • For a “qualified individual” there is an exclusion of a certain amount of “foreign earned income” in calculating US tax liability. This may mean that a great many US citizens living abroad in fact have a nil liability to US tax (depending, obviously, on their circumstances; the s. 911 exclusion is not unlimited, and they may have other income which is not “foreign earned income”).

  • The fact that a non-resident may be able to take advantage of s. 911 is explicitly disregarded in s. 6012. If you are a non-resident, and your gross income, including your foreign earned income, exceeds the “exemption amount” (which is the same amount for residents and non-residents), then s. 6012 requires you to file a return.

But it could well be that there are other provisions that I have overlooked that would change this situation. Plus, I have no idea whether the IRS tries to enforce this, or tries to penalise non-residents for not filing a return, at least in cases where their liability is nil.

20

What if they want to vote?