Martin Mroz at Quora: There are a number of serious consequences of obtaining US citizenship that apply to you and your children in perpetuity that you may not be aware of.
- The US is effectively the only country in the world that taxes citizens on worldwide income even when they don’t live in America — even if they’ve never lived in America, or never will — and that applies to their children too. Citizens must file US taxes forever or face serious IRS penalties. It’s not just the taxes it’s the potentially huge burden of preparing those filings each year forever.
- Due to FATCA regulations it may be impossible for US citizens to open bank accounts in many foreign countries at all, even if they live there.
- Similarly US citizens may not be able to open a brokerage account anywhere other than the US.
- If a US citizen living abroad opens a business abroad they may own a controlled foreign corporation from an IRS perspective and that is its own special level of difficulty in your annual tax filings again even if you’ve never set foot in the US or never will.
- Any time your aggregate foreign bank accounts exceed $10,000 USD in a calendar year you must also file FBAR with FinCEN to avoid having them seize your funds.
These are just some of the regulatory burdens which may influence the decision.
A comment
Mark Stock · 6y
Relative to the FBAR – worse yet is when that person marries a citizen of a country other than the US – any account held jointly will be required to be disclosed to the US Government. And the penalties for failure to do so are significant even though the US likely has no rights to tax.
Finally, the EXIT tax required to give up citizenship is also punitive – 10% of net worth, so even after exiting the US they will have the choice of paying taxes or paying a penalty.
Relative to the first statement in the above response it is practically correct but does factually miss Eritrea which I understand still does tax global income; however would not represent a significant change in the context the author provides us.
More comments here.
