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Old 25.03.2011, 15:35
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Dual citizen to file tax form ?

My son has been born in the US while we were Visiting Scientists (we both are Swiss). When he was 6 months old, we returned to Switzerland where we are living since.

He recently got his US passport in addition to his Swiss passport, but we are struggling to understand what his obligations towards the US are. We know that Switzerland has an agreement with the iRS on double taxation, but what we cannot find out is:

> Does he have to file a tax form? And if so: where?

We would like to avoid any trouble and follow the rules, but have been not successful to reach the iRS by phone or email.

Any advice more than welcomed!
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Old 25.03.2011, 15:46
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Re: Dual citizen to file tax form ?

Unfortunately, if you hold to the letter of the law then yes your son will have to file once he has an income. Practically, I wouldn't worry about it and would not file of he hasn't to date.
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Old 25.03.2011, 16:12
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Re: Dual citizen to file tax form ?

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Unfortunately, if you hold to the letter of the law then yes your son will have to file once he has an income. Practically, I wouldn't worry about it and would not file of he hasn't to date.
I'd be careful with that one. With the new FATCA law coming into place in 2013, he might just get caught out.

If he wants to keep his American citizenship, he should file. You can find directions here: http://www.irs.gov/businesses/small/...=97324,00.html

It could get costly in the long run, though (American citizens need to pay taxes even while abroad, and though there's a low-end exemption, it doesn't carry you that far in Switzerland with current exchange rates) - if he doesn't need it, he should consider renouncing the citizenship.
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Old 25.03.2011, 17:22
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Re: Dual citizen to file tax form ?

If you renounce your US citizenship, you are still required to file taxes for another 7 years or so. It's not an easy thing to get out of.

Also, you aren't double taxed. You can claim the amount of taxes you paid to the first country against the US tax. So unless you makes quite a lot of money, you don't really have to pay all that much.
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Old 25.03.2011, 18:31
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Re: Dual citizen to file tax form ?

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Also, you aren't double taxed. You can claim the amount of taxes you paid to the first country against the US tax. So unless you makes quite a lot of money, you don't really have to pay all that much.
True, but... (There is always a 'but' when it comes to US taxes. )

If you live in a high-tax canton or otherwise have large deductions relative to reported income, you may find yourself hit with the AMT.

I was doing the math the other day, trying to figure out if I can afford to move farther out into the boonies, and was surprised to see that any canton/Gemeinde where the total tax rate (ultimately, the deduction for taxes paid to CH) works out to be more than 7% less than the US rate would kick me into the AMT zone. Ouch.

It used to be that the AMT only hit a few folks at the top. Unfortunately, as an expat deducting the taxes paid to the host country it has now become a reality for many of us normal folks, too.

On the other hand, what is the value of being able to freely move to/work in the US, should your son wish to some day?

But in any event, until your son enters his professional life he really won't have to pay anything. He'll need to file, however.

---

Also be aware of the FBAR rules - is your son listed on any of your bank (or other financial) accounts?

And, I *think* there may be inheritance issues - but I'm very hazy on that, best to speak with an attorney.

---
A tad OT, but something I've always wondered for dual citizens... What about military duty? As a Swiss citizen your son will have to do his Swiss military service - how does that fit with the prohibition against serving in a foreign army as a US citizen? I'd expect that there must be some kind of agreement, as dual citizens aren't exactlly a rare species...
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Old 26.03.2011, 00:46
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Re: Dual citizen to file tax form ?

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If you renounce your US citizenship, you are still required to file taxes for another 7 years or so. It's not an easy thing to get out of.

Also, you aren't double taxed. You can claim the amount of taxes you paid to the first country against the US tax. So unless you makes quite a lot of money, you don't really have to pay all that much.
It is no longer the rule that you have to file for another 7 years. Your assets are computed as if you sold them all for book to market value and you pay taxes on that amount.


http://renunciationguide.com/Analyzi...#FutureChanges
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Old 26.03.2011, 07:06
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Re: Dual citizen to file tax form ?

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Also, you aren't double taxed. You can claim the amount of taxes you paid to the first country against the US tax. So unless you makes quite a lot of money, you don't really have to pay all that much.
I've seen that claim a lot, actually, and it depends on how you define double taxation - being taxed by two governments or being taxed on your entire income by two governments.

The fact of the matter is that you don't have to make all that much in Switzerland (say, top 1/3 of households or so in Zurich - avg household income is about 120k, if I remember correctly) to be liable for a fair bit of US income taxes.

SwissMiss143 has already rebunked the 7 year claim, but I think there's a bit more; if I recall correctly (by no means certain) I think that exit taxation applies only above a certain net wealth as well, doesn't it? In any case, I'll be doing my damnedest to spend everything before I renounce.
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Old 26.03.2011, 18:08
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Re: Dual citizen to file tax form ?

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> Does he have to file a tax form? And if so: where?
As an US citizen, he definitely has to file. You can obtain copies of tax forms from the IRS web site. There is a specific address to file your return for overseas residents.

Prior to 2006 it was possible to exclude a portion of your income (around $80000) and pay taxes on the remainder (at the lower tax rate). After 2006, the exclusion is still possible, but the tax applied on the remainder was at the higher rate (as if the income was not excluded). This meant a large jump in tax liability for expat US citizens. The tax could be offset by applying the foreign tax credit, but Swiss taxes are not that high so it is likely that one will have to pay to the US.

I'm not a US citizen, but I did hold a green card for sentimental purposes. The changes after 2006 made it no longer worthwhile to keep it so I gave it up. As Corbets mentioned, one only needs a moderate income in a low tax country with a weak US dollar and then you'll have to start paying. And it is going to get worse; unfortunately the US feels that expats are a source (of fatcats) to be tapped.

Since you are Swiss and your son will likely remain here, then I would recommend that he renounces his citizenship.
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Old 26.03.2011, 18:53
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Re: Dual citizen to file tax form ?

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A tad OT, but something I've always wondered for dual citizens... What about military duty? As a Swiss citizen your son will have to do his Swiss military service - how does that fit with the prohibition against serving in a foreign army as a US citizen? I'd expect that there must be some kind of agreement, as dual citizens aren't exactlly a rare species...
The answer is here:
http://travel.state.gov/law/citizens...nship_780.html
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Old 26.03.2011, 19:28
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Re: Dual citizen to file tax form ?

These days, your son can do Zivildienst instead of the Swiss army.

You probably know that though....
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Old 26.03.2011, 19:49
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Re: Dual citizen to file tax form ?

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Since you are Swiss and your son will likely remain here, then I would recommend that he renounces his citizenship.
And do it yesterday, do not wait another day. The US tax laws and their pursuit of collection is becoming ever more desperate and the penalties ever more draconian.

There is no single more complicated tax law in the world - it's over 40000 pages and there are blatant cases of conflicting instructions. It is an unmitigated disaster.

'Taxation without representation is tyranny.'
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