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PSA: U.S. tax laws for Overseas Americans


Lanny
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Every week, I receive an email newsletter from the man who writes about U.S. taxes for About.com   He is very helpful. The newsletter that just came has a link to this article, which may be of interest to some of you.

http://taxes.about.com/od/international/fl/accidental-americans.htm?utm_source=exp_nl&utm_medium=email&utm_term=list_taxes&utm_campaign=list_taxes&utm_content=20150616

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Wow, complicated stuff.

 

I've never thought about how our automatic citizenship laws (anyone born here, the child of any citizen) could negatively impact some people.

The interesting thing to me is that the US makes it easy to accidentally acquire citizenship and its tax obligations, then tells those same people that they can't pass on that citizenship to their children. But maybe that inability will turn into a benefit.

 

As it stands, my US citizen sons have to register for the draft and declare US taxes, but cannot pass their citizenship to their children.

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The interesting thing to me is that the US makes it easy to accidentally acquire citizenship and its tax obligations, then tells those same people that they can't pass on that citizenship to their children. 

 

I didn't know someone could be a US citizen and not be able to pass that on to their children. Could you provide an example? 

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Laura, for your kids, if they establish residency in the US, they can pass on their citizenship.  They would just need to prove having lived in the US (for, I think four years) during late teens/adulthood.  

 

I wonder what my kids will do someday - will it be valuable enough to them to fulfil the obligations of citizenship?  I'm not sure. 

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I didn't know someone could be a US citizen and not be able to pass that on to their children. Could you provide an example? 

 

In order to pass on your citizenship, you have to prove that you are both a US Citizen AND you have lived in the US for a certain period of time (I think after you are 14 years old, but I don't exactly remember).  That is, of course, if you don't live in the US.  If you live there and have kids, they are US citizens.

 

Having done the paperwork for my kids, I will say that it was a bit of a pain.  However,  I can appreciate that the merely nominal US Citizens that live around me ought not to confer their citizenship purely by birth, but should have SOME sort of tie to the country.

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In order to pass on your citizenship, you have to prove that you are both a US Citizen AND you have lived in the US for a certain period of time (I think after you are 14 years old, but I don't exactly remember).  That is, of course, if you don't live in the US.  If you live there and have kids, they are US citizens.

 

Having done the paperwork for my kids, I will say that it was a bit of a pain.  However,  I can appreciate that the merely nominal US Citizens that live around me ought not to confer their citizenship purely by birth, but should have SOME sort of tie to the country.

 

The issue for me is the mismatch: either my sons are complete US citizens with both rights and obligations, or they are not.  Right now, they have obligations but incomplete rights.  They are dual UK/US citizens.  Hobbes was born in neither the UK nor the US:

 

UK rights

No right to pass on his citizenship to his children unless he establishes UK residence

 

UK responsibilities

Only has to pay/declare tax to the UK if he has UK earnings or is resident in the UK or both.  Does not have to declare his bank accounts to the UK government if he lives overseas.  Giving up citizenship seems simple.  Does not have to register for the draft

 

US rights

No right to pass on his citizenship to his children unless he establishes US residence

 

US responsibilities (most of which are unique among Western countries)

Has to declare taxes to US and potentially pay taxes on worldwide income.  Has to declare his bank accounts to the US if he lives overseas. Has to go through very onerous tax procedure if he wants to stop being American.  Has to register for the draft wherever he lives. 

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The law about children born overseas, to a parent who is a U.S. Citizen, depends upon whether or not it is the Mother or the Father who is the U.S. Citizen. If the laws now are the same and when we went through the process for DD, it is much easier if it is the Mother who is the U.S. Citizen.  There was a requirement that I the father, for example, had to prove that I had lived in the USA for "n" years, after my 14th birthday.

 

This is the link to the information on the web site of the ACS (American Citizen Services) in the U.S. Embassy in Colombia about this:

http://bogota.usembassy.gov/service/births-abroad.html

 

Someone with a CRBA (Consular Report of Birth Abroad) is considered to be a "Natural Born" citizen and is able to be the President of the U.S.

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The law about children born overseas, to a parent who is a U.S. Citizen, depends upon whether or not it is the Mother or the Father who is the U.S. Citizen. If the laws now are the same and when we went through the process for DD, it is much easier if it is the Mother who is the U.S. Citizen.  There was a requirement that I the father, for example, had to prove that I had lived in the USA for "n" years, after my 14th birthday.

 

This is the link to the information on the web site of the ACS (American Citizen Services) in the U.S. Embassy in Colombia about this:

http://bogota.usembassy.gov/service/births-abroad.html

 

Someone with a CRBA (Consular Report of Birth Abroad) is considered to be a "Natural Born" citizen and is able to be the President of the U.S.

 

It is the same if it is the mother.  We did the same thing.

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The issue for me is the mismatch: either my sons are complete US citizens with both rights and obligations, or they are not.  Right now, they have obligations but incomplete rights.  They are dual UK/US citizens.  Hobbes was born in neither the UK nor the US:

 

UK rights

No right to pass on his citizenship to his children unless he establishes UK residence

 

UK responsibilities

Only has to pay/declare tax to the UK if he has UK earnings or is resident in the UK or both.  Does not have to declare his bank accounts to the UK government if he lives overseas.  Giving up citizenship seems simple.  Does not have to register for the draft

 

US rights

No right to pass on his citizenship to his children unless he establishes US residence

 

US responsibilities (most of which are unique among Western countries)

Has to declare taxes to US and potentially pay taxes on worldwide income.  Has to declare his bank accounts to the US if he lives overseas. Has to go through very onerous tax procedure if he wants to stop being American.  Has to register for the draft wherever he lives. 

 

Perhaps I don't understand because I've never had to do it, but does he have to re-register for the draft wherever he moves to?  I thought an 18yo boy just registered and that was it.

 

Giving up citizenship for Americans is simple too, from what I recall being told (and what I see here).

 

I agree that your Hobbes is in an especially awkward spot.  

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It's not necessarily very hard to renounce US citizenship, although it is expensive (and keeps getting more expensive) and you have to appear in person at a consulate or embassy overseas. It can take several visits and there are several papers to sign and you still might be subject to US taxes.  It's certainly doable, but I wouldn't call it simple.

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Perhaps I don't understand because I've never had to do it, but does he have to re-register for the draft wherever he moves to?  I thought an 18yo boy just registered and that was it.

 

Giving up citizenship for Americans is simple too, from what I recall being told (and what I see here).

 

I agree that your Hobbes is in an especially awkward spot.  

 

No - you register once for the draft, as far as I know, but it's an example of a large obligation to set against a minimal set of rights.

 

That article about giving up citizenship is interesting.  What I have heard before is that, essentially, the IRS assumes that you must be giving up citizenship for tax reasons, so a massive investigation is triggered.  No fun at all.

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The interesting thing to me is that the US makes it easy to accidentally acquire citizenship and its tax obligations, then tells those same people that they can't pass on that citizenship to their children. But maybe that inability will turn into a benefit.

 

As it stands, my US citizen sons have to register for the draft and declare US taxes, but cannot pass their citizenship to their children.

 

Citizenship is interesting.  My daughter-in-law's father was born on a UK military base in Germany and his parents were from the UK, so he has UK citizenship.   DIL was born in Canada and that is where she lived all her life (until she married my son).  Her father has both a Canadian and UK citizenship, but DIL only has Canadian.  She would have to go through the whole visa application process to try and gain UK citizenship, which they are thinking of doing. 

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Citizenship is interesting.  My daughter-in-law's father was born on a UK military base in Germany and his parents were from the UK, so he has UK citizenship.   DIL was born in Canada and that is where she lived all her life (until she married my son).  Her father has both a Canadian and UK citizenship, but DIL only has Canadian.  She would have to go through the whole visa application process to try and gain UK citizenship, which they are thinking of doing. 

 

We're a mishmash too.  

 

- I'm British by birth.  I applied for a US Green Card and was granted a temporary one.  The system was so inefficient and irritating that when we left the US after two years, I cancelled my application.  So I am just British.

- Husband is American by birth.  He is also British by naturalisation (marriage to me plus legal residence in the UK)

- Calvin was born in Britain and has dual nationality.  At present, he could pass his British nationality on to any children.  

- Hobbes was born in Hong Kong after the handover to China.  He also has dual nationality.  I think he could now pass his British nationality on to a child born wherever, because he has been resident in the UK for some time.

 

Husband, Calvin and I gained Hong Kong permanent residence due to living there legally for seven years.  Hobbes gained right of abode by being born there.  I think that we all currently have 'right to land', so that we could go there without a visa to work and regain our permanent residence.

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We're a mishmash too.  

 

- I'm British by birth.  I applied for a US Green Card and was granted a temporary one.  The system was so inefficient and irritating that when we left the US after two years, I cancelled my application.  So I am just British.

- Husband is American by birth.  He is also British by naturalisation (marriage to me plus legal residence in the UK)

- Calvin was born in Britain and has dual nationality.  At present, he could pass his British nationality on to any children.  

- Hobbes was born in Hong Kong after the handover to China.  He also has dual nationality.  I think he could now pass his British nationality on to a child born wherever, because he has been resident in the UK for some time.

 

Husband, Calvin and I gained Hong Kong permanent residence due to living there legally for seven years.  Hobbes gained right of abode by being born there.  I think that we all currently have 'right to land', so that we could go there without a visa to work and regain our permanent residence.

 

Ha, that is quite a mishmash!  :)  One thing about US citizenship, is that once you have it, the US only allows you to have one other.  But having permanent residence somewhere (without the citizenship there) is probably a whole different category and is acceptable.

 

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You mean that my boys have to be president as well?

 

No. It is not mandatory that they become President of the U.S., but it is possible that they can become President of the U.S.  In very recent years, the Republican nominee for President has been someone who was born outside the U.S.A. but was born a U.S. Citizen. John McCain and Mitt Romney.  At this time, one of about 20 Republicans competing for the nomination is Ted Cruz. He was born in Canada.  So, if your boys should decide to live in the USA and are interested in Politics, they can run for President...

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No. It is not mandatory that they become President of the U.S., but it is possible that they can become President of the U.S.  In very recent years, the Republican nominee for President has been someone who was born outside the U.S.A. but was born a U.S. Citizen. John McCain and Mitt Romney.  At this time, one of about 20 Republicans competing for the nomination is Ted Cruz. He was born in Canada.  So, if your boys should decide to live in the USA and areinterested in Politics, they can run for President...

 

It's okay, I was joking.

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No - you register once for the draft, as far as I know, but it's an example of a large obligation to set against a minimal set of rights.

 

That article about giving up citizenship is interesting.  What I have heard before is that, essentially, the IRS assumes that you must be giving up citizenship for tax reasons, so a massive investigation is triggered.  No fun at all.

This is my understanding as well.

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It's okay, I was joking.

 

When I came home yesterday, I was tired, and I had a good laugh, reading what you'd written...

 

Probably your DH knows that he can vote, Absentee, in U.S. Elections, in the last state he voted in, in the USA. Here's a link to the office in the Pentagon and they are very helpful to Overseas Americans (civilians and military).     http://www.fvap.gov/

 

NOTE: There are some states that will permit the children of Overseas Americans, children who have never lived in the USA, to vote in the state where their U.S. Citizen parent(s) lived/voted.  I vote Absentee in Texas and at this time, Texas is not one of the states that permit that...

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No. It is not mandatory that they become President of the U.S., but it is possible that they can become President of the U.S. In very recent years, the Republican nominee for President has been someone who was born outside the U.S.A. but was born a U.S. Citizen. John McCain and Mitt Romney. At this time, one of about 20 Republicans competing for the nomination is Ted Cruz. He was born in Canada. So, if your boys should decide to live in the USA and are interested in Politics, they can run for President...

Wait, then why the heck are all those birthers trying to make out like Obama was born in Kenya, since it wouldn't disqualify him from the presidency anyway

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Wait, then why the heck are all those birthers trying to make out like Obama was born in Kenya, since it wouldn't disqualify him from the presidency anyway

No kidding. The law was the same in 1961 and 1970 when both men were born so even if Obama had been born in Kenya, the situation would be the same. They both were born to US citizen mothers who were married to their fathers and their mothers had lived in the US for at least 10 years with five of those years after they were 14.

 

Some people want to argue about the natural-born citizen bit, but that would apply the same to both Obama and Cruz.

 

To be fair, there are still Birthers out there who don't like Cruz either, and Cruz doesn't have much of a chance at the nomination so it's not really an issue, but I can't imagine people would get quite as worked up about Cruz as they did about Obama.

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Probably your DH knows that he can vote, Absentee, in U.S. Elections, in the last state he voted in, in the USA. Here's a link to the office in the Pentagon and they are very helpful to Overseas Americans (civilians and military).     http://www.fvap.gov/

 

NOTE: There are some states that will permit the children of Overseas Americans, children who have never lived in the USA, to vote in the state where their U.S. Citizen parent(s) lived/voted.  I vote Absentee in Texas and at this time, Texas is not one of the states that permit that...

 

Thanks - yes, Husband is registered to vote in California, where we last lived in the US.  I'll ask 'Calvin' if he wants to try to register to vote.

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Wait, then why the heck are all those birthers trying to make out like Obama was born in Kenya, since it wouldn't disqualify him from the presidency anyway

 

This is something I have never understood but arguing with these folks is futile.  They are adamant that if you are born on foreign soil, you can't be president.  It is not true.  You must be born a citizen.  That is all.  You can be born a naturalized citizen.  Obama was, even if he had been born in Kenya.

 

http://usgovinfo.about.com/od/thepresidentandcabinet/a/presrequire.htm

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Wait, then why the heck are all those birthers trying to make out like Obama was born in Kenya, since it wouldn't disqualify him from the presidency anyway

 

 

This applies to those who were born overseas, to one or more qualified U.S. Citizens (qualified because they meet the residence requirements, etc. required to convey U.S. Citizenship) and who were issued a CRBA (Consular Report of Birth Abroad) by the ACS (American CItizen Services unit) in the U.S. Embassy in the country of birth. 

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Thanks - yes, Husband is registered to vote in California, where we last lived in the US.  I'll ask 'Calvin' if he wants to try to register to vote.

 

 

CA will permit Calvin to vote!   Here's the data:

 

http://www.fvap.gov/citizen-voter/reside

 

and on that page it shows for CA:

 

"California

A U.S. citizen who was born abroad, who is eligible to vote, and who has not previously registered to vote in any other State, may register and vote in the California county where a parent or legal guardian would be eligible to register and vote."

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This is something I have never understood but arguing with these folks is futile.  They are adamant that if you are born on foreign soil, you can't be president.  It is not true.  You must be born a citizen.  That is all.  You can be born a naturalized citizen.  Obama was, even if he had been born in Kenya.

 

http://usgovinfo.about.com/od/thepresidentandcabinet/a/presrequire.htm

 

 

Those who are born Overseas and are issued a CRBA  (Consular Report of Birth Abroad) are not Naturalized U.S. Citizens. They are "Natural Born" Citizens under the U.S. Constitution.  

 

I don't think a Naturalized Citizen can become President.

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CA will permit Calvin to vote!   Here's the data:

 

http://www.fvap.gov/citizen-voter/reside

 

and on that page it shows for CA:

 

"California

A U.S. citizen who was born abroad, who is eligible to vote, and who has not previously registered to vote in any other State, may register and vote in the California county where a parent or legal guardian would be eligible to register and vote."

 

Thanks.  I suspect he will have strong views about the presidential election, so he might well like to vote.  I'll pass the info on to him.

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He's pretty enthusiastic.  The following edited to remove party politics:

 

Oh hell yes. My mum just informed me that I'm eligible to vote in the US presidential election, which is something I've always wanted to do and means I can at least attempt to ward off the [ ] tide of [ party name] [expletive deleted].

 

He just emailed to ask our last address in California.  Thanks for the information, Lanny.

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My impression is that not many countries grant citizenship just by virtue of birth in the country as the US does. One of my nieces was born in Scotland when her parents were there as PhD students. She apparently cannot claim citizenship there because of the type of visa (student) her parents had at the time.

 

In the US that wouldn't have mattered.

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My impression is that not many countries grant citizenship just by virtue of birth in the country as the US does. One of my nieces was born in Scotland when her parents were there as PhD students. She apparently cannot claim citizenship there because of the type of visa (student) her parents had at the time.

 

In the US that wouldn't have mattered.

 

I would imagine that it is due to the history of country-building by immigration.  

 

Calvin was born in London, but it was due to my citizenship, in addition to his place of birth, that he gained his own nationality.  This is the page that explains the rule; I assume that a student visa doesn't count as 'settled'.

 

You don’t automatically get British citizenship if you were born in the UK.

If you were born on or after 1 January 1983, you’ll be a British citizen if your mother or father was either:

  • a British citizen when you were born
  • ‘settled’ in the UK when you were born
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He's pretty enthusiastic.  The following edited to remove party politics:

 

Oh hell yes. My mum just informed me that I'm eligible to vote in the US presidential election, which is something I've always wanted to do and means I can at least attempt to ward off the [ ] tide of [ party name] [expletive deleted].

 

He just emailed to ask our last address in California.  Thanks for the information, Lanny.

 

 

Super.   You are welcome!    In Texas, I need to Register, every year.  I didn't do that for 2015, because there are no elections I am voting in this year. I will do that very early in January 2016. 

 

He needs to vote in the same jurisdiction that his father votes in, in CA.  When he has that information, and possibly information about his Father's voting information, then he should go to the FVAP.GOV web site.

 

I only vote in Federal Elections. I do not vote in State/County/City elections. Probably it will be the same for him, voting in CA.  I believe they are going to elect a new U.S. Senator from CA in 2016 also.

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Those who are born Overseas and are issued a CRBA  (Consular Report of Birth Abroad) are not Naturalized U.S. Citizens. They are "Natural Born" Citizens under the U.S. Constitution.  

 

I don't think a Naturalized Citizen can become President.

 

That is what I meant.  I really should not post prior to 3 cups of coffee. 

 

Thanks.

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Wait, then why the heck are all those birthers trying to make out like Obama was born in Kenya, since it wouldn't disqualify him from the presidency anyway

 

Mainly because they fail to understand what legally makes someone a "natural born citizen."

 

Side note: I once tried to explain to a woman that a "natural born citizen" does not have to be born vaginally.  She seriously thought being born via c-section barred you from being able to be the president.

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Wait, then why the heck are all those birthers trying to make out like Obama was born in Kenya, since it wouldn't disqualify him from the presidency anyway

 

Most of us were taught in school that "natural born" meant "born in the US."  I know my brother, who was born in Guatemala to 2 US citizens, always believed that he was not eligible to be president.   

 

However, the term has never been legally defined.   In the case of President Obama, if it had been proven that he was born outside the US, it would almost certainly have gone to the Supreme Court for a legal definition.   There is no way I can see that the Supreme Court would have said he did not qualify--there would have been rioting in every city in America!     So I do think it's a moot point.  

 

But for many of those who were always taught that the term did mean you had to be born in the US (or to military parents, as McCain was), I think it seemed like a big deal.   The idea that nobody had defined it legally but it was just something we all believed to be understood was largely missed.  (And even people in favor of Obama never said, in those days, that it didn't matter.  They said it wasn't true, but they didn't bother to address the underlying Constitutional question.)

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It is the same if it is the mother.  We did the same thing.

 

 

When I was reading up on this, before DD was born, there was a difference.  Now that I reflect back on that, I believe it had to do with parents who were not married. It was much easier for a U.S. Citizen Mother to pass along U.S. Citizenship to her child than for a U.S. Citizen Father to do it.  I guess if the couple is married that enters into the regulations of what is required to transmit U.S. Citizenship to a child born overseas. I'm married so that wasn't part of what we needed to do...

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HA! My husband is an international tax accountant and keeping up with every new law and/or rule each year is getting crazy.  

 

 

Your DH is probably very familiar with another part of this, which is the reason that U.S. based corporations will not repatriate the $ they have in banks overseas. It is more profitable for them to invest their money overseas, and not pay very high U.S. tax rates, just to repatriate money to the USA.  

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Mainly because they fail to understand what legally makes someone a "natural born citizen."

 

It is my understanding that the term means the person has been a US citizen since birth. So, either born on US soil, or elsewhere in the world to a parent who is a US citizen.

A person who acquires US citizenship at some later point in life is not a natural born citizen.

 

 

A 2011 Congressional Research Service report stated that

 

The weight of legal and historical authority indicates that the term "natural born" citizen would mean a person who is entitled to U.S. citizenship "by birth" or "at birth," either by being born "in" the United States and under its jurisdiction, even those born to alien parents; by being born abroad to U.S. citizen-parents; or by being born in other situations meeting legal requirements for U.S. citizenship "at birth." Such term, however, would not include a person who was not a U.S. citizen by birth or at birth, and who was thus born an "alien" required to go through the legal process of "naturalization" to become a U.S. citizen.

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It is my understanding that the term means the person has been a US citizen since birth. So, either born on US soil, or elsewhere in the world to a parent who is a US citizen.

A person who acquires US citizenship at some later point in life is not a natural born citizen.

 

 

Exactly. A person who has a CRBA (Consular Report of Birth Abroad) is considered to be a "Natural Born" citizen from the time of birth. A Naturalized Citizen is someone who was a citizen of another country, went through the Naturalization process, and took the Oath of Allegiance. This is from the applicable web page of the ACS (American Citizen Services) in the U.S. Embassy in Colombia:

 

"For children born to two U.S. citizen married parents, one of the parents must demonstrate residence in the U.S. prior to the child’s birth. For children born after November 13, 1986 to a US citizen parent married to a non-US citizen parent, the U.S. citizen parent must have resided in the United States at least for 5 years (at least two years after the age of 14) before the child was born. Requirements for children born at other times or to unmarried parents are described here."

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