
According to the Washington Post the royal wedding between Meghan Markle and Prince Harry could cause American tax headaches for British royal family because of IRS review.
It is a modern fairytale: Hollywood actress marries British prince. But the upcoming wedding of Britain’s Prince Harry to American actress Meghan Markle will come at a price: the United States’ IRS reviewing the assets of the royal family.
Buckingham Palace announced that Markle would become a British citizen after her wedding next year. There is a big obstacle in the way: American tax laws. All US citizens have a TAX and Foreign Bank Account Reporting (FBAR) obligation, wherever they live or work in the world. This is governed by the American law FATCA and enforced by intergovernmental agreements between many countries and the US. A member of the royal family would be treated just like anyone else.
If Prince Harry were to move to the United States to live with Markle, he would not be expected to file taxes in Britain. The United States’ citizenship-based taxation system is unusual: Only Eritrea has a similar system. For Prince Harry, the issue isn’t that he will suddenly end up paying U.S. income tax, but rather that Markle’s US citizenship could open up the finances of the royal family to the IRS.
If Markle remains a U.S. citizen, she will have to file her taxes to the IRS every year. Like every US citizen (also those with dual nationality) wherever they are born or where they are currently based or work, has to file US taxes yearly. This includes US nationals with and without passport, green card holders and others.
This sharing of financial information with the U.S. government would be undesirable for the royal family. Although Markle’s tax information would not become public once sent to the United States, it would leave the royal family open to IRS review.
Royal children would complicate matters even further. Parents cannot elect to have a child lose his or her US citizenship, so the children will be US citizens and therefore US taxpayers. Unless they decide to give up their US citizenship when they reach the age of majority.
A solution would be for Meghan Markle to renounce her US citizenship and pay exit tax. Markle is not alone: the American Treasury Department data show that 5,411 people chose to expatriate in 2016: a 26 percent year-over-year increase. US tax experts expect that number to rise because of the increasing tax burdens placed on U.S. citizens living abroad.
Americans Overseas helps Americans living abroad to become US tax compliant in an organized way and avoid unnecessary double taxation. Based on your personal situation, we introduce you to the appropriate US tax advisor in our AOS network. They will make you a tailor-made offer to help with your tax filings. Free of charge and free of any obligations.
Contact us for more information
Source: Washington Post
Understanding the US tax system, the obligations, and all the additional terms can be difficult. Especially if one lives outside of America. Is your question not answered? Contact us.
U.S. citizens and resident aliens who live abroad are generally required to file a federal income tax return and pay taxes on their worldwide income.
Read more... about Who is required to file taxes in the US?Yes, US citizens are required to file taxes on their worldwide income, regardless of where they are living.
Read more... about Do US citizens living abroad still have to file taxes in the US?Received an American check? You can cash your check in the following ways: cash the check at your own bank, transfer to another person (endorsement), cash checks using an online service or cash the check by another bank.
Read more... about How can I cash my US check?US citizens living abroad may be required to file Form 2555 and/or Form 1116 to claim the foreign-earned income exclusion.
Read more... about Are there any special tax forms required for US citizens living abroad?FBAR (Foreign Bank Account Report) filing is the requirement for certain U.S. individuals and entities to report their foreign financial accounts to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. The FBAR filing requirement applies to U.S. persons who have a financial interest in, or signature authority over, one or more foreign financial accounts if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year.
Read more... about What is FBAR filing?