I am a duel national living in the UK since birth. I have a child who is not a US citizen. Do I add UK child benefit as income on my tax return & must I pay tax on it?

[rmag1]

Last year an accountant did my returns and they did add UK child benefit yet I wasn't taxed on it at the end.  I have added UK CB on TT for this year but it is registering as being taxed and I don't know what I need to do the change this.  I feel if I have done things correctly my TT return for 23 should align with the returns the accountant did for 20 -22 more or less but currently it is not as I am being taxed on Child Benefit on TT when it wasn't taxed on my accountants forms last year.  Can anyone help!?

[ThomasM125 · Accepted solution]

While there seems to be some disagreement as to whether the income is taxable in the United States, most online discussions seem to conclude that it is taxable as it is not addressed specifically in any tax treaty between the UK and US. Thus, by default it would seem to be taxable because it is not specifically exempted from taxation by IRS code.

If you determine it is not taxable, you would need to enter the income and then enter a negative adjustment to income and cite the rule in a treaty that would exempt it. If you look on your previous year tax return, you would see a negative entry in line 24(z) of schedule 1 (Additional Income and Adjustments to Income), "Other Adjustments." 

You can make that adjusting entry in TurboTax as follows:

1. From the Federal menu in TurboTax find Wages and Income 

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the treaty and the adjustment as a negative number

You must complete Form 8833 Treaty-Based return position disclosure and include with your return. That form is not available in TurboTax, so you will need to complete that separately and attach it to your tax return that you would mail in. Here is a link to the form:  Treaty income adjustment

[pk]

@rmag1 ,  while I recognize the position taken by my colleague @ThomasM125 ,  my opinion on child benefit in the UK is different -- this benefit ( as I understand from my time in the UK during the mid eighties ) is a general benefit to all mothers  with little children.  it is not based on any active or passive income.   Thus I do not see this as income for the family -- you did not do anything ( active ) or invest  ( passive ) to get this -- you get this because you have a child. All resident of the UK get this benefit.  Not Taxable income.

That is my position.

Is there more I can do for you ?