3 stupid questions

[Helen123]

1. I assume oversea electricity bill accounts shouldnt be reported into Fbar /8938, right?

2. Fbar/8938 are only needed for US resident alien but not for non-US resident alien, right?

3. For my friend, his baby is an American. The couples are not the American and they do not live in the US. Does the baby need to report US tax before university graduation ? What is the minimum requirement for the baby to report tax?

Thanks,

H

[Anonymous_]

I will page @pk

[pk]

@Helen123 

1. I assume oversea electricity bill accounts shouldnt be reported into Fbar /8938, right?

FBAR and FAYTCA requires  ONLY the reporting of  Foreign Bank accounts ( and the amounts therein ) and  other Specified Assets  ( generally liquid  or semi liquid )

2. Fbar/8938 are only needed for US resident alien but not for non-US resident alien, right?

FBAR and FATCA rules apply ONLY to US persons ( citizen / GreenCard / Resident for tax purposes )

3. For my friend, his baby is an American. The couples are not the American and they do not live in the US. Does the baby need to report US tax before university graduation ? What is the minimum requirement for the baby to report tax?

A US person ( as defined above )  generally would not be required to file a return on world income unless  the  person is  no-longer a dependent of the parents and makes  more than US$4400 ( I think -- it is ion that neighborhood).

And NO , the questions are NOT STUPID at all.

Is there more I can do for you?

pk

[Helen123]

many thanks.

So, I assume for Q1 and 2, my original understandings are correct. For 3, if the parents of American baby are not American and they do not live in the USA, the baby doesnt need to report anything to IRS when they are the depent of the parents.

Can you please finally confirm my understanding is correct?

Much appreciated.

H

[SusanY1]

Yes, your understanding is correct for your the first question.  For the second, it's not clear what you mean by a non-US resident alien.  Any US person- citizen, permanent resident alien (whether living in the US or not),  or US tax resident (by substantial presence or election) must file the FinCEN 114 and/or 8398 as applicable.  

The dollar amounts that trigger the Form 8398 filing are different for residents of the US versus US persons who live outside of the US, but other criteria remain the same.  (See more about the dollar amounts HERE.)

The US citizen child files when he or she meets the criteria for filing a tax return.  This criterion is the same for children living within the US and those living abroad.

A child can be required to file a tax return even when a dependent of their parent, particularly if the child has significant amounts of unearned income (from dividends, investments, or capital gains) or has income earned from work or self-employment.  The IRS has a wizard that helps determine when an income tax return must be filed Do I Need to File a Tax Return?

A US citizen child with foreign assets in bank or investment accounts that exceed $10,000 on any day of the year would also have a filing requirement for FinCEN 114 (FBAR). 

While those issues aren't especially common, it is important to be aware that there are instances in which a dependent child living abroad could be required to file a tax return.  

 

[Helen123]

Many thanks Susan. 

Non-US resident alien I mean is the person who doesnt have PR or US citizen and stay in the US less than 183 days. Based on your description, I think Non-US resident alien can ignore the Fbar, right?

For Q3, would you mind mentioning how much the US baby (dependent of non-US parents) earned must file the US tax? The parents (my friend) want to save some money for the baby in the baby's bank account.

H 

[Helen123]

@SusanY1 @pk when you have time, can you pleaes help have a final look, thanks

H

[SusanY1]

Yes, someone like you describe would file a tax return as a nonresident (1040NR), if required to file and would not be subject to the FBAR/FinCEN 114 filing requirements.  

[Helen123]

thanks

[pk]

@Helen123 , generally agreeing with @SusanY1 , excellent and generally complete reply,  I am still a bit troubled  about the following:

Your friend  whom are  NRA  ( Non-Resident Alien with no current  locus in USA  ( they live in the UK ) had a baby in the USA ( thus having a right to be a citizen of USA , has a bank account  in the USA with >= US$10,000.   This  will generate  interest income belonging to the child.  Question now is does the child have to file a US return  ?

My understanding of a child born in the USA of NRA ( US Customs & Immigration definition and not the IRS def. ) is still an Alien, till the child gets a US passport i.e. an effort has been made to take advantage of  the birthright citizenship.   Therefore in the UK the child would be a resident of UK  and be taxed  on foreign income  on parent's  income tax return.   I am not very familiar with the current UK tax laws  ( was during the Thatcher era when I live there ).  Note that generally  & under treaty most countries  use residency  laws to determine tax on foreign passive income --- generally interest and dividend incomes..

Does this make sense ?

pk

[Helen123]

many thanks, PK. 

[Vanessa A]

Clarification.  You keep saying baby, but then mentioned university graduation.  How old is the child?  Has any steps been taken to take advantage of his birthright citizenship?  

A baby that is 6 months old would not be treated the same as a 23 year old who is graduating from college? 

[JHH123]

this is interesting

[Helen123]

Hi 

Sorry for the confusion. @Vanessa A . My friends (non-green card holder) just had the baby in the USA and they just went back to their own country. The baby has the US passport. When they go back to their own country, they plan to open a bank for the baby and save the monery for the tuition fees. Therefore, they have a few questions. 

1.  Two of the couples were NRA for 2023. The father had a little bank interests in 2023 and he may need to report the USA tax as NRA. When the father reports the tax, can he claim child tax benefit?

2. After comng back to their country in 2024, the couple has no relation with USA (no income from USA). I think they do not need to report any tax anymore to the USA, right?

3. If 2 is correct, the couple wants me to help ask at what criteria does the baby need to file tax? I understand that if the baby has the bank acccount with more than 10k USD, the parents need to help baby to fill in the Fbar within baby's name.  From 0 years old to the age of university graduation (22 I assume), at what critiera, does the baby living outside of the USA need to file the tax, especially for parents do not need to file US tax ? 

If you do not mind, can u help answer these three separatedly? Many thanks

[pk]

@Helen123 , please read and/or refer your friend(s) to this  [puib from the IRS regarding kiddie tax..  There is also some reference to this  situation  in the instructions for form 1040/1040-SR

Topic no. 553, Tax on a child's investment and other unearned income (Kiddie tax) | Internal Revenue...

What I don't understand is the reason behind setting up a US bank account in the name of the child ( a new born  & us citizen )  -- what are they trying to achieve?

Also child tax credit is for dependent child  of US persons   ( SO no unless the parents  choose to be  treated as a US person  -- not living here in the US  and not earning in the US -- does  not make sense to me ).   Therefore my question as to what are they trying to achieve  ( now  or in the distant  future ) ?

Is there more help you need ?

pk