# SFOP in Finland, shocked and needing advice!



## Devilfish85 (Dec 16, 2017)

Hey Expatforum,

From browsing previous posts, I can see that my situation isn't that rare, though I'd be hesitant to assume any advice in a previous case applies to mine as well. I moved from the US to Finland 6 years ago after marrying a my Finnish wife. I've been attending a university for most of that time. I occasionally received some income for a project or internship, but it was never significant. Then, yesterday, I received a letter from my Finnish bank in accordance with FATCA, inquiring about my reporting the account to the IRS. I was at first incredulous that this could be required of me, as my wife and I were sure we'd done adequate research when I moved. Unfortunately it appears I've been unaware that I needed to file taxes on my income and report my bank holdings.

After the initial panic, I found an explanation of SFOP, and for obvious reasons this seems like my best bet. I'm not in any financial shape right now to hire a lawyer, so it looks like I'll need to go it alone. I have no question that I'm eligible.

I understand that this is a forum and not actual legal counsel, but I've seen some good advice given by people who have been at this for a while, so I could use a little help getting my head around this. Please excuse the numbered list, but I find it helps me better organize the answers in my head.

1. As I understand it, in compliance with FATCA, my bank will now report that I have an undisclosed account to the IRS. This is the most pressing question... will this immediately trigger an investigation of some kind? Should I somehow declare my intention to file the SFOP as soon as I have gathered my records and triple checked my forms?

2. Im having trouble understanding how my spouse fits into this. In Finland, there is no such thing as a joint tax filing, everyone is an individual. She's not a US citizen, and files here taxes here. So long as I am filing individually both here in Finland and on my 1040 in the US, she should be left out of it, right? They cant tax a non citizen when we file everything separately, can they?

3. I understand I am supposed to file 1040's for the previous 3 unreported years, 2016,2015, and 2014. 2017 isn't due until April. Is that correct? And are some of the suggested filing softwares mentioned in previous posts, like TaxAct, still valid options?

4. Perhaps the most specific and difficult one to answer: Aside from rare and small stipends or internship compensation, my income is provided by the Finnish government as a university student and permanent resident. It's taxed here, and not much at that... probably not enough to break the 10000 mark annually, but I'll double check that. The majority is for being a student, and a smaller amount is housing allowance. How can I figure out if these sources must be reported? If they are exceptions, then there is no problem and I probably didn't need to file the 1040 anyway.

Thanks for your time. I know I can be verbose, but complete answers require complete questions.

- Mike


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## Devilfish85 (Dec 16, 2017)

A small update, I believe I have resolved #4 in my own research. My education allowance should be counted as social security, and as I'm married filing individually, my threshold for report is 4050, so I definitely need to file all 3 years. Still looking for the other answers!


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## Bevdeforges (Nov 16, 2007)

OK - as I've said to those in similar circumstances, don't panic. You're far from the only person in this situation and it's fairly easy to resolve. (There is also no great rush - particularly given that you probably owe little or nothing anyhow.)



> 1. As I understand it, in compliance with FATCA, my bank will now report that I have an undisclosed account to the IRS. This is the most pressing question... will this immediately trigger an investigation of some kind? Should I somehow declare my intention to file the SFOP as soon as I have gathered my records and triple checked my forms?


Your bank will only report the bank accounts you have, along with the year end balance. They have no clue whether these accounts are or are not "disclosed" or even subject to disclosure. At the moment, it appears that the IRS only links up FBAR reports with income tax filings if they find something questionable or "odd" on your tax filings. So no, nothing is going to get immediately triggered. 


> 2. Im having trouble understanding how my spouse fits into this. In Finland, there is no such thing as a joint tax filing, everyone is an individual. She's not a US citizen, and files here taxes here. So long as I am filing individually both here in Finland and on my 1040 in the US, she should be left out of it, right? They cant tax a non citizen when we file everything separately, can they?


Correct. She is NOT a "US taxpayer" so that's why you need to file as "Married, filing separately." The only place where she might come into it is if you have any joint accounts - and then you need to disclose them on your FBAR filing as joint accounts. There was a deal where you could just indicate that the joint account holder was your spouse and be done with it. (No need to disclose a name, and obviously she has no US SS number.) You still report the full maximum balance for the year, but that's it. I'm not sure if that's still an option or not (because DH and I have no joint accounts).


> 3. I understand I am supposed to file 1040's for the previous 3 unreported years, 2016,2015, and 2014. 2017 isn't due until April. Is that correct? And are some of the suggested filing softwares mentioned in previous posts, like TaxAct, still valid options?


The rule is current year plus 3 prior years. For the moment, 2017 is the "current" year, although the final forms aren't year available. It's probably the most practical to wait until February when the 2017 will be ready to go. File 2017 (electronically, if you like) and then prepare the 3 prior years (2016, 2015 and 2014) and send them in as a single packet (because you can't file the prior years electronically and have to mark them up to indicate you're taking the Streamlined option).

Tax Act or any of the online options is only available for the current year - but check the IRS Free-file program (usually available after mid-January) for all your options for free online filing. You'll have to pay for online (or software) preparation of the prior years. Usually TaxAct is the best deal at about $15 a year. You will, however, have to print off the forms to send in by postal mail.


> 4. Perhaps the most specific and difficult one to answer: Aside from rare and small stipends or internship compensation, my income is provided by the Finnish government as a university student and permanent resident. It's taxed here, and not much at that... probably not enough to break the 10000 mark annually, but I'll double check that. The majority is for being a student, and a smaller amount is housing allowance. How can I figure out if these sources must be reported? If they are exceptions, then there is no problem and I probably didn't need to file the 1040 anyway.


You should take a look (online - or download) at IRS Pub 54, which explains all the stuff about filing from overseas, and also publication 525 on Reportable and Non-reportable Income. Public assistance payments are specifically noted as NON-reportable income (somewhere around p. 21 or so) so your housing assistance shouldn't be reported. Student benefits and stipends are also subject to special rules and often can simply be omitted.

One bit problem is that everything is defined in "US terms" with no specific information about foreign payments and benefits. They pretty much leave it up to you to interpret what you're receiving according to US definitions. But you can be pretty aggressive on that. If it fits (to your mind) just make a note of the basis you're using and carry on. They very rarely challenge foreign source income because they receive no confirmation of it. They actually don't get any information about foreign interest income - only the foreign financial account balances - and even then, will likely only ask questions if the amounts involved are significant (say 6 digits or more). 

So, net-net, plan to work up your 2017 return after the turn of the year. And then from what you learn from that exercise, you can do the last 3 years. Chances are you will owe $0 (and the penalty for late filing is a % of what you owe - so you can do the math).
Cheers,
Bev

Oops - forget to give you the link: https://www.irs.gov/forms-instructions


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## Devilfish85 (Dec 16, 2017)

Thanks for the advice Bevdeforges! Phew, yeah that his us pretty hard. To keep it short and sweet, I'm 2 months away from finishing school and getting back to work, the light at the end of our long financial tunnel... and then we find this out yesterday on the eve of our 10 year anniversary. The wife was in tears expecting the worst.

Thanks for the clarification. I continued to research long into the night and came to some similar conclusions, but was far from confident in them. I can definitely handle filing everything for the SFOP with my 2017 returns... right now Im trying to finish my thesis and graduate.


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## Nononymous (Jul 12, 2011)

I would stop thinking about this for at least the next few months. There is no rush to do anything. If you want to become compliant, do it next year when you have the time to look into it.

And there's also an argument in favour of not becoming compliant, if you don't have immediate plans to return to the US, or significant US assets, and particularly if you are in the process of acquiring a second citizenship. Do some research on the non-compliance option. Just because your bank details are being reported by FATCA, doesn't mean the IRS can or will do anything useful with the information.


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## Bevdeforges (Nov 16, 2007)

To add to what Nononymous has said, there are LOTS of legitimate reasons why someone with a bank account (that is being reported to the IRS by their bank) might not have sufficient income to have to file. Has to do with things like being a student, receiving public assistance (as defined by the IRS) and other stuff.

As he says, take your time and evaluate your situation carefully before you jump into the filing thing. As an overseas resident, even if you are supposed to file, you have until June 15th to get the return for 2017 in. And, in going over you situation, you may find you don't need to file that. 
Cheers,
Bev


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## Devilfish85 (Dec 16, 2017)

I apologize for not acknowledging further replies until now. The intense relief caused me to set all this out of my mind for a few days, not to mention the thesis work and holiday obligations.

I appreciate all the advice and will revisit the issue after the holidays. Best wishes for yours!


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## HillbillyCanuck (Apr 9, 2012)

Bevdeforges said:


> Tax Act or any of the online options is only available for the current year - but check the IRS Free-file program (usually available after mid-January) for all your options for free online filing. You'll have to pay for online (or software) preparation of the prior years. Usually TaxAct is the best deal at about $15 a year. You will, however, have to print off the forms to send in by postal mail.


Actually, Taxact does offer previous year's versions: https://www.taxact.com/products/prior-years

However, this is only for the downloaded, not the online versions.

Unfortunately, Taxact significantly raised their prices beginning in 2016.


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