What do the US and Eritrea have in Common?

Every year, the month of April brings one of the year’s greatest annoyances. Let me explain…

I was born in Canada, I live in the UK, but  I am also US citizen as this was passed on to me by my mother.

Being a US citizen carries both rights and responsibilities. I have never worked or lived in the United States, apart from a short period when I was a small child, for less than a year. However, I am required to file income tax and FBARs (“foreign” bank account reports) to the US government every year.

Why?

Because the US, along with Eritrea, is one of only two countries in the world that taxes citizens rather than residents. And so even though I make no money in or from the US, I need to report my income there. I also need to report all of my “foreign” bank accounts. That is, my local, non-US bank accounts that I use on an everyday basis. I don’t even have a bank account in the US.

To be honest, I have never actually had to pay anything as the taxes I pay in the UK are recognised to keep me from being double-taxed on the same income. However, given that TurboTax can not conceive of the fact that my wife is not American and therefore does not have a US social security number, I can’t file online. And so I have to print off pages of documents and send them by international post at my own expense.

Strangely enough, I can’t vote in US elections. As I am not and have not been a resident in any US state, I don’t meet the requirements for voting from abroad. This all feels a bit like taxation without representation. Is there not a certain irony in this, given that I live in the UK?

7 thoughts on “What do the US and Eritrea have in Common?

  1. My family has the same problem and annoyance. We don’t use USA infrastructure i.e. Roads, schools, medicine etc. we don’t make money in the USA and yet have to report to IRS every year. This is taxation without representation. Thanks for your post.
    Lesley

    Liked by 1 person

  2. Needing to supply the paperwork is quite annoying, but in general, if you don’t live in the US you won’t have to actually pay US taxes regardless of your tax status in your country of residence. You can use the Foreign Earned Income Exclusion, which is designed so that US citizens living abroad full time don’t need to contribute financially to US systems. The exclusion limit is $105k this year, but it expands every year to account for inflation. So, if you make less than $105k per year, you don’t need to pay any US taxes on it as long as you pass either the physical presence test or bona fide resident test (which basically proves that you weren’t in the US for a long period of time during the tax year).

    As for the non-citizen spouse, you can just file as “married filing separately” through TurboTax. This negates most of the tax breaks you get from being married, but since you’re not paying US taxes anyway this doesn’t really have an effect on your total taxes.

    Liked by 2 people

    1. Yes, you can file “married filing separately.” This is the logical choice in most circumstance, but if your spouse is a non-resident alien without a TIN, it is impossible to e-file. I think this is actually IRS policy rather than Turbo Tax’s fault. Hence, a trip to the post office. Ah, the joys. 🙂

      Liked by 1 person

  3. Yes, “married filing separately” is a good choice for many of us. However, if your spouse is a non-resident without a TIN, e-filing is impossible. I think this is actually IRS policy rather than a Turbo Tax issue. Either way, a trip to the post office becomes necessary. I think having a TIN does not necessarily come with tax obligations, but I don’t necessarily see the point.

    Liked by 1 person

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