TAX??? Low earning American marries High Earning European

September 13, 2014 10:15 AM

Okay. I have been in Europe now (and live as an EU citizen) for almost 10 years. I have no desire to ever return to the states. NONE. WHATSOEVER. NONE. I make very little money so have never passed the threshold to need to pay American tax. But if I get married to a high earner here in Europe. (we are talking 200k plus per year in salary) what happens? Is that joint income if we are married? And if we want to have, say- 3 children, in quick succession. How could this work? Could I have the children, pass on my citizenship, pay tax and then relinquish? What happens? I am completely fine with giving up my US citizenship, and my possible future husband has no desire to live in America- but I realize it could be beneficial to my children. I'm not sure exactly what to think. This is not happening at the moment. But it could happen in the next couple of years. Advice and anecdotes are most welcome!
posted by misspony to Law & Government (13 answers total)

For what its worth- I am also due to inherit twice from American relatives. In the ballpark of 300k in the next 10 years (but sooner rather than later) and another 350k sometime after that.
posted by misspony at 10:26 AM on September 13, 2014

I am not an attorney. But as someone who lived in Europe for 8 years and did not file tax returns because I didn't make enough money, news flash: As long as you are an American citizen, you will need to file tax returns because of laws about overseas assets. If you have any kind of a bank account, and you do, then you will need to file those returns sooner or later or potentially face huge IRS fines. Like, huge.

Merely FYI.

As for the other stuff, have no idea. Good luck!
posted by Bella Donna at 10:38 AM on September 13, 2014

Tax is due on your sole earnings, not your joint earnings. In terms of inheriting, it is your duty to pay income tax, not the duty of the estate to withhold it -- you can collect and walk, if you wish. Your childrens' eligibility for citizenship is not tied to your tax status, either. Your embassy cannot withold passport or consular services from you based on your tax status, and this includes registering the birth of your children as US citizens.

Note that even if you do not earn over the tax threshold, you are still supposed to file each year. Expats who have no intention of residing in the US in future often ignore that requirement. If your intent is to ignore US taxation and filing requirements entirely, I would encourage you to get an EU passport as well, because I am prudent that way.
posted by DarlingBri at 10:38 AM on September 13, 2014

(This is not tax advice, please consult a professional, blah blah blah)

I'm going to guess that living in Europe the income tax rate of your current country is equal or higher than it would be for living in the US. In that case:

As a general rule, tax you owe the US on foreign income can be substantially reduced or even zero if you have already been taxed on said income in your country of residence. You can claim these paid taxes either as credits on your Federal return or claim each amount as an itemized deduction. The optimal choice between deduction or credit depends on your country of residence and whether or not this country has a tax treaty with the US as often there are substantial differences between US and foreign tax laws with respect to what the foreign country taxes and what it does not tax.

Obviously you do value your US citizenship somewhat if you want to pass it on to your kids, even if you never plan on returning. I think it would be worth your effort to schedule a couple meetings with a qualified tax specialist.
posted by sbutler at 10:46 AM on September 13, 2014

I haven't filed in 7 years :-( I don't know what that means... I was young and stupid when this started!
posted by misspony at 10:48 AM on September 13, 2014

Not having to pay tax does not mean you don't have to file a tax return. Unless you're making four figures or less, you probably still need to file.

You should consult a professional who is familiar with U.S. tax laws, especially as they relate to expats, and the tax laws of your country of residence (and possibly the tax laws of your EU country of citizenship, if it's different).
posted by one more dead town's last parade at 10:58 AM on September 13, 2014

I moved to Europe when I was young and stupid, and for the same reasons never bothered to file a US tax return. I paid all my Italian taxes (which put me ahead of a lot of Italians), but finally bit the bullet and consulted an American accountant in Italy who did all my back returns in one go. I think it was at about the 10 year mark.

It didn't cost anywhere near as much as I expected, I didn't owe anything, but I had all my paperwork in order. It was then a very simple matter to get them done each year, again for very modest cost.

I also had no intention of ever moving back to the US, but life is weird, and as it turned out I did eventually repatriate. It was a gigantic weight off my shoulders to know that my paperwork was in order and the IRS was not going to come looking for me.

This was years ago, so now I suspect it's even easier for you to find an American accountant who can do this for you. Ask other expats, if you know any, or look near US embassies and consulates.
posted by Superplin at 10:59 AM on September 13, 2014

First, don't panic. Second, find a qualified accountant experienced in these matters. They can help you with filing back tax returns and arranging payment plans, if needed, with the IRS, and also answer your questions about marriage and children. There is an entire industry to help people who have accidentally run afoul of tax laws. Again, don't panic. Just get started on the process to fix it.
posted by studioaudience at 11:03 AM on September 13, 2014

Just to note:

I have no desire to ever return to the states. NONE. WHATSOEVER. NONE.

Even if that's true now, you have no guarantee that that will always be true. I don't at all mean that in any sort of rah-rah-America way. You're thinking of having some kids, who you'd like to pass US citizenship to. What if they go to college in the US -- you won't want to go to their graduation? What if, thirty years from now, one or more of your kids and your resulting grandkids live in Houston? You won't want to see them?

Renouncing US citizenship is serious business. And while the US is supposed to treat a former-citizen who's now a citizen of the UK or France or wherever the same as any other citizen of that country, I've heard tell of former citizens being denied entry because the border agent "determined" they were a high risk for overstay in ways that made them think it was because they were former citizens.

But if I get married to a high earner here in Europe. (we are talking 200k plus per year in salary) what happens?

You talk to an accountant who will help you file tax returns as married-filing-separately.

I am also due to inherit twice from American relatives.

There's no US income tax on inheritances, though you might owe a little capital-gains or income tax on what your inheritance earned while it was being processed. The same accountant you find to help you file tax returns can almost certainly deal with this too.
posted by ROU_Xenophobe at 11:54 AM on September 13, 2014

In terms of inheriting, it is your duty to pay income tax, not the duty of the estate to withhold it -- you can collect and walk, if you wish.

Pretty sure there's no federal inheritance tax on those amounts. Some states, very few, yes, but clearly that doesn't come into play here.

On the spouse question, you really want to go straight to the horse's mouth.

Oh, and by the way, the current administration has recently upped the cost of giving up citizenship. Because the government is petulant and more people are jumping ship.
posted by IndigoJones at 11:55 AM on September 13, 2014

Thank you so much everyone! I have been feeling a little bit concerned that I was in big trouble for not filing taxes but it sounds like others have been there and managed to put it right again. So thanks for that!

And I will definitely heed the advice not to give up citizenship. While I personally never plan to return, you never know. And I would also hate to deprive my children of any opportunities that they might wish for.

Cheers everyone!
posted by misspony at 2:33 AM on September 14, 2014

I'm a US citizen living in Canada since 2000, and only recently found out about the tax law. With a tax expert's advice I did a streamlined filing, where instead of filing for each of the 12 years, I just filed for the past six, plus FBARs for the past four. It's a new solution the IRS began offering people in our situation a couple years ago. This is much more desirable than the Overseas Voluntary Disclosure Program, which forces you to go through their criminal investigation office (!!!). I sent my forms in last March, and other than a couple receipts from the IRS I haven't heard a peep. Still keeping my fingers crossed. You can PM me if you need any (non-professional) advice.
posted by Koko at 10:16 PM on September 15, 2014

(edit: the Streamlined Filing is tax returns for the past four years, FBARs for the past six)
posted by Koko at 10:30 PM on September 15, 2014