Determining US citizenship can be complex, especially for individuals born outside the United States or with only one US citizen parent. However, understanding your citizenship status is crucial, as it directly impacts your US tax obligations, regardless of where you live.
Who Is Considered a US Citizen?
You may be considered a US citizen if any of the following apply:
- Born in the US: You are automatically a citizen, regardless of your parents’ citizenship status.
- Born outside the US to two US citizen parents: Generally, you are considered a citizen from birth.
- Born outside the US to one US citizen parent: You may still be a US citizen if the US parent meets certain residency requirements:
- Born after 14 November 1986: The US parent must have lived in the US for at least five years, including two years after reaching age 14.
- Born before 14 November 1986: The US parent must have lived in the US for at least ten years, including five years after reaching age 14.
Note: Even if you have never obtained a US passport or Social Security Number (SSN), you may still be considered a US citizen by birth.
Why It Matters for Taxes
The United States is one of the few countries that taxes its citizens on worldwide income, regardless of where they reside. This applies to dual citizens and so-called “accidental Americans” (those who may be unaware of their US citizenship). US citizens must file annual US tax returns and report their global income. Additionally, there may be further reporting requirements, including:
- FBAR (Foreign Bank Account Report): Required for individuals who hold foreign financial accounts exceeding $10,000 in total at any time during the year.
- Form 8938 (Statement of Specified Foreign Financial Assets): Required for individuals with significant foreign financial assets, depending on specific thresholds.
Failure to comply with these requirements can result in significant penalties, even if no US tax is owed.
Case Studies: Determining US Citizenship Status
These case studies provide practical examples of how US citizenship rules apply in different family situations.
Oliver Thompson: Born Abroad but Still a US Citizen
Oliver Thompson, born in Australia, has an Australian mother and a US-born father, John, who lived in the US from birth until age 22.
- John’s US residency history easily satisfies the requirement: he lived in the US for 22 years, including more than 8 years after age 14.
- Despite never registering Oliver’s birth with the US Consulate and Oliver not having a US passport or SSN, Oliver is automatically a US citizen by birth.
- As a result, Oliver is considered a US person and must comply with US tax obligations, including filing annual tax returns and potentially reporting foreign bank accounts.
Sophia Blake: Born Abroad and Not a US Citizen
Sophia Blake was born in Melbourne to Rachel, an Australian citizen, and David, a US citizen who moved to Australia at age 10.
- David’s US residency history does not meet the requirement: he left the US before age 14 and has not lived in the US since then.
- He does not satisfy the minimum 5-year residency requirement, nor the 2 years after age 14 rule.
- As David cannot transmit citizenship under these rules, Sophia does not automatically acquire US citizenship.
- Sophia is not considered a US person for tax purposes, so her family does not need to worry about US tax filings or financial reporting requirements for her.
Elliot Adams: US Citizenship by Birth Despite Foreign Parents
Elliot Adams was born in New York City to parents Tom and Anna Adams, who were Australian expats living in the US temporarily for work.
- Tom and Anna were not US citizens; they held temporary work visas during their stay in the US.
- Elliot was born in the US and, under the 14th Amendment, automatically acquired US citizenship at birth, despite his parents’ non-citizen status.
- The family left the US when Elliot was just 6 months old, returning to Australia permanently.
- Even though Elliot has lived his entire life in Australia and his parents are not US citizens, he remains a US citizen by birth. This means Elliot is a US person for tax purposes, regardless of whether he has a US passport or SSN.
- He must comply with US tax filing requirements and may need to report foreign bank accounts if certain thresholds are met.
These case studies demonstrate that US citizenship can be automatically acquired based on a parent’s residency history or place of birth, even without formal registration or documentation.
Why Registration Doesn’t Matter
A common misconception is that a child must be registered at the US Consulate or hold a US passport to be considered a US citizen. In reality:
- Paperwork Is Not a Determining Factor: The child’s citizenship status is determined by the parent’s US residency history or the child’s place of birth, not by formal registration.
- Tax Obligations Can Exist Without a Passport or SSN: Even if a child does not have US identification, they may still have US tax responsibilities if they meet the citizenship criteria.
What Should Families Do?
If you are a US citizen or were living temporarily in the US when your child was born, it is important to:
- Review your US residency history, particularly if you left the US when your child was young.
- Consult a tax adviser to understand the implications of your child’s citizenship status.
- Stay aware of filing requirements, even if your child has never held a US passport or SSN.
By understanding these rules, you can avoid unexpected tax complications and ensure compliance. If you are unsure about your child’s status, seeking advice from a specialist in expat tax can provide clarity and guidance.
Get Expert Advice
Navigating US citizenship and its tax implications can be challenging, especially for families living abroad. At AmTax, we offer tailored advice for US citizens and dual nationals. Whether you need assistance with tax compliance, managing reporting requirements, or considering renunciation, our experienced team is here to help. Contact us today to schedule a consultation and ensure you meet your US tax obligations while minimising any potential risks.
