A person aged 18 and over can apply for US citizenship. But if the application is for a child under the age of 18, the application must be made by that child’s US citizen parent, or their legal guardian. While it is possible to obtain US citizenship when an individual is under 18, such a decision has significant tax implications.
Tax consequences
Applying for US citizenship for your minor child has significant tax consequences. In fact, as soon as your child becomes a US citizen, he is considered a US tax resident. Thus, he will have to file an income tax return every year and will have to report his assets outside the United States, if he meets the reporting thresholds.
Obligation to file an income tax return
The obligation to file a US tax return mainly depends on two factors:
- The individual’s civil status;
- Earned income.
There are several situations that require filing, but generally speaking for 2020, a single person who made less than $12,400 US is not required to file an income tax return.
However, be aware that it may be advantageous to file a return. On the one hand, because the Internal Revenue Service (IRS) will have a history of your declarations and on the other hand, because the person will be able to possibly benefit from certain tax advantages through their tax returns.
Simplified form
For a child under the age of 18, you might be tempted to use a simplified form. Until 2017, it was possible to use Form 1040-EZ if the individual met certain criteria. However, this form has not been used since 2018 and Form 1040, U.S. Individual Income Tax Return should be used by everyone.
Other tax obligations
Other tax obligations may apply, as the case may be. When it comes to foreign asset reporting obligations (FBAR, 8938 and 3520 forms, etc.), here are the main ones to watch out for:
FBAR: As soon as the thresholds for the obligation to file the FBAR are met, it must be produced, even if the tax return is not to be produced.
Form 8938: There is no obligation to file Form 8938 if the thresholds for the obligation to file a return (based on marital status and earned income) are not met, even if the reporting obligation thresholds producing Form 8938 are met.
Forms 3520/3520-A: As soon as the thresholds for the obligation to file Form 3520/3520-A are met, they must be filed, even if the tax return is not to be filed.
As US tax can sometimes be very complex, we invite you to contact one of our tax experts who specialize in US tax. They can discuss with you the various advantages and disadvantages for an individual to become a US citizen.