# 50 years Expat and oblivious to US tax requirement.



## Dail-K

Hi I’m new here and would appreciate your views on my situation.

I am a US citizen and have lived in Denmark for 50 years with permanent work and residency permit.
I was recently told that I’m required to file income tax and FBAR to the US even though I have no dealings there.

So I’m wondering what are the consequences of my “negligence”?

What kind of penalties does the IRS dole out for this?

How far am I required to go back? 50 years is a long time!

How does one go about this? Any suggestions? 

Thanks.


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## tomwins

First, read the IRS letter: Report of Foreign Bank and Financial Accounts (FBAR) | Internal Revenue Service

So, yes if you are a citizen of the US, you need to report some foreign accounts. You don't need to report these:

Correspondent/Nostro accounts,
Owned by a governmental entity,
Owned by an international financial institution,
Maintained on a United States military banking facility, 
Held in an individual retirement account (IRA) you own or are beneficiary of,
Held in a retirement plan of which you’re a participant or beneficiary, or
Part of a trust of which you’re a beneficiary, if a U.S. person (trust, trustee of the trust or agent of the trust) files an FBAR reporting these accounts.
Regarding penalties, the letter indicates that if you are not under investigation by the IRS, and acted on your own initiation to file delinquent forms, you may escape penalties.
Quoting directly again:
Follow these instructions to explain your reason for filing late. If you’re participating in an optional program to resolve FBAR noncompliance, such as Delinquent FBAR Submission Procedures or Streamlined Filing Compliance Procedures , follow the instructions for those programs. 

Read this letter from the IRS on delinquency: Delinquent FBAR Submission Procedures | Internal Revenue Service

You may want to find a tax lawyer to act on your behalf and even one who specializes in FBAR Amnesty Programs. You are not the the first to miss this requirement.


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## Nononymous

Your have two basic options:

(1) Use the streamlined program (link in the previous post) to get caught up. You would have a near-zero chance of being penalized, and depending on your income level you might still receive up to $3200 in stimulus benefits.

(2) Continue doing nothing. It's not like the IRS has notice, or cares.

Two questions:

(1) Do you only have the US passport? If so you may want to exercise caution and take care of this. Dual citizens with no US assets or other financial ties are in a better position to ignore this.

(2) Do you have any children? If you spent 5 years in the US, 2 of which after age 14, any children born abroad in wedlock are automatically US citizens, even if their birth was never registered with a US consulate.


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## Dail-K

tomwins said:


> First, read the IRS letter: Report of Foreign Bank and Financial Accounts (FBAR) | Internal Revenue Service
> 
> So, yes if you are a citizen of the US, you need to report some foreign accounts. You don't need to report these:
> 
> Correspondent/Nostro accounts,
> Owned by a governmental entity,
> Owned by an international financial institution,
> Maintained on a United States military banking facility,
> Held in an individual retirement account (IRA) you own or are beneficiary of,
> Held in a retirement plan of which you’re a participant or beneficiary, or
> Part of a trust of which you’re a beneficiary, if a U.S. person (trust, trustee of the trust or agent of the trust) files an FBAR reporting these accounts.
> Regarding penalties, the letter indicates that if you are not under investigation by the IRS, and acted on your own initiation to file delinquent forms, you may escape penalties.
> Quoting directly again:
> Follow these instructions to explain your reason for filing late. If you’re participating in an optional program to resolve FBAR noncompliance, such as Delinquent FBAR Submission Procedures or Streamlined Filing Compliance Procedures , follow the instructions for those programs.
> 
> Read this letter from the IRS on delinquency: Delinquent FBAR Submission Procedures | Internal Revenue Service
> 
> You may want to find a tax lawyer to act on your behalf and even one who specializes in FBAR Amnesty Programs. You are not the the first to miss this requirement.





tomwins said:


> First, read the IRS letter: Report of Foreign Bank and Financial Accounts (FBAR) | Internal Revenue Service
> 
> So, yes if you are a citizen of the US, you need to report some foreign accounts. You don't need to report these:
> 
> Correspondent/Nostro accounts,
> Owned by a governmental entity,
> Owned by an international financial institution,
> Maintained on a United States military banking facility,
> Held in an individual retirement account (IRA) you own or are beneficiary of,
> Held in a retirement plan of which you’re a participant or beneficiary, or
> Part of a trust of which you’re a beneficiary, if a U.S. person (trust, trustee of the trust or agent of the trust) files an FBAR reporting these accounts.
> Regarding penalties, the letter indicates that if you are not under investigation by the IRS, and acted on your own initiation to file delinquent forms, you may escape penalties.
> Quoting directly again:
> Follow these instructions to explain your reason for filing late. If you’re participating in an optional program to resolve FBAR noncompliance, such as Delinquent FBAR Submission Procedures or Streamlined Filing Compliance Procedures , follow the instructions for those programs.
> 
> Read this letter from the IRS on delinquency: Delinquent FBAR Submission Procedures | Internal Revenue Service
> 
> You may want to find a tax lawyer to act on your behalf and even one who specializes in FBAR Amnesty Programs. You are not the the first to miss this requirement.


Thanks so much will get on it ASAP. When you suggest a tax lawyer (US I'm assuming) that that would be a better idea than if I chose a firm like "Bright Tax" to file a Streamlined Filing Compliance Procedure on my behalf? (assuming it's less expensive?)


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## Dail-K

Nononymous said:


> Your have two basic options:
> 
> (1) Use the streamlined program (link in the previous post) to get caught up. You would have a near-zero chance of being penalized, and depending on your income level you might still receive up to $3200 in stimulus benefits.
> 
> (2) Continue doing nothing. It's not like the IRS has notice, or cares.
> 
> Two questions:
> 
> (1) Do you only have the US passport? If so you may want to exercise caution and take care of this. Dual citizens with no US assets or other financial ties are in a better position to ignore this.
> 
> (2) Do you have any children? If you spent 5 years in the US, 2 of which after age 14, any children born abroad in wedlock are automatically US citizens, even if their birth was never registered with a US consulate.


(1) My annual retirement income in Denmark is about $16,800/yr. (before DK tax 38%). So you think I would be eligible for "stimulus benefits" if of course I did the streamlined program - it might even pay for itself!

(2) I'm thinking "peace of mind". I only have the one US passport. The Danish procedure for citizenship (which I have started recently) takes about 18 months. But my plan is to relocate to Mexico ASAP, so that seems a long time

...and I don't have kids.


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## Nononymous

You could easily ignore it (but get Danish citizenship for insurance) or do a streamlined filing (last 3 years income tax, last 6 years FBAR) to collect the stimulus benefit (possibly up to the full $3200 if you act relatively quickly). No need to hire a lawyer, and if your income is only pension then it might be quite easy to do the filing yourself or use an expat tax firm. Do you have other assets or investment income? That's where things can get complicated.


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## Dail-K

Nononymous said:


> You could easily ignore it (but get Danish citizenship for insurance) or do a streamlined filing (last 3 years income tax, last 6 years FBAR) to collect the stimulus benefit (possibly up to the full $3200 if you act relatively quickly). No need to hire a lawyer, and if your income is only pension then it might be quite easy to do the filing yourself or use an expat tax firm. Do you have other assets or investment income? That's where things can get complicated.





Nononymous said:


> You could easily ignore it (but get Danish citizenship for insurance) or do a streamlined filing (last 3 years income tax, last 6 years FBAR) to collect the stimulus benefit (possibly up to the full $3200 if you act relatively quickly). No need to hire a lawyer, and if your income is only pension then it might be quite easy to do the filing yourself or use an expat tax firm. Do you have other assets or investment income? That's where things can get complicated.





Nononymous said:


> Your have two basic options:
> 
> (1) Use the streamlined program (link in the previous post) to get caught up. You would have a near-zero chance of being penalized, and depending on your income level you might still receive up to $3200 in stimulus benefits.
> 
> (2) Continue doing nothing. It's not like the IRS has notice, or cares.
> 
> Two questions:
> 
> (1) Do you only have the US passport? If so you may want to exercise caution and take care of this. Dual citizens with no US assets or other financial ties are in a better position to ignore this.
> 
> (2) Do you have any children? If you spent 5 years in the US, 2 of which after age 14, any children born abroad in wedlock are automatically US citizens, even if their birth was never registered with a US consulate.
> 
> 
> 
> Nononymous said:
> 
> 
> 
> You could easily ignore it (but get Danish citizenship for insurance) or do a streamlined filing (last 3 years income tax, last 6 years FBAR) to collect the stimulus benefit (possibly up to the full $3200 if you act relatively quickly). No need to hire a lawyer, and if your income is only pension then it might be quite easy to do the filing yourself or use an expat tax firm. Do you have other assets or investment income? That's where things can get complicated.
> 
> 
> 
> No I don't have any other income at the moment but am planning on selling my house which I own outright and I may be getting an extra income towards the end of the year and forward....?
> 
> Also, I plan to relocate to Mexico as soon as I can get a second citizenship which, unfortunately looks like 18 months for Denmark. Seems to me things could get really complicated going forward, which makes me feel more attracted to doing the streamlined filing and FBAR. Thanks for clarifying that it is only 3 years back tax and 6 for FBAR - seems doable!
Click to expand...


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## Nononymous

I think this was your actual reply (yes the quote feature can be confusing):



Dail-K said:


> No I don't have any other income at the moment but am planning on selling my house which I own outright and I may be getting an extra income towards the end of the year and forward....?
> 
> Also, I plan to relocate to Mexico as soon as I can get a second citizenship which, unfortunately looks like 18 months for Denmark. Seems to me things could get really complicated going forward, which makes me feel more attracted to doing the streamlined filing and FBAR. Thanks for clarifying that it is only 3 years back tax and 6 for FBAR - seems doable!


If you sell your house, be aware that the US taxes capital gains beyond an exemption of $250k per person or $500k per couple. If (like many other countries) Denmark does not tax gains on the sale of a primary residence, you'd have nothing to offset that, in the event that you exceed the exemption.

One other thing to bear in mind, Denmark is one of only five countries (the others being Canada, France, Netherlands and Sweden) with a mutual collection assistance provision in the tax treaty with the US. How it generally works is that the IRS can request that the national tax authorities help collect penalties on its behalf from anyone who is not also a citizen of that country. So you would not have any protection against collection of any tax debts incurred prior to acquiring Danish citizenship. If you live outside of those five countries, collection is more difficult. Don't be overly concerned, however, you should be able to file streamlined without any grief. But full disclosure is necessary, as a non-Dane in Denmark you are hypothetically more vulnerable to penalties being collected. Also, this rule only applies to tax penalties, not FBAR penalties, which fall outside the tax treaty as they are not part of tax law. FBAR penalties can't be collected outside the US. The other risk for someone without dual citizenship is that if they run up an uncollected tax debt in excess of $51k, the IRS can request that their passport be revoked or not renewed.


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## Dail-K

Thank you Nononymous, yes the reply feature is confusing...

OK so Denmark does not have a capital gains tax and I will probably be getting more than twice the $250k that you mention for the house. If I wait and sell the house after I get my DK citizenship will I owe capital gains tax to the US for that sale?

Now for the FBAR. I've looked at what is required and at the moment I have 3 bank accounts. But before my _danish_ husband died in April. I/we had 6, 2 of which were in his name and one was a joint account. So because I could do transactions with his accounts as well as my own do I need to file FBAR for my husband's accounts as well? That's crazy! (which makes me think the answer is "yes").


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## Nononymous

You would certainly need to do FBAR for the joint account, not sure about the other two. Is or was the bank aware of your status as a US citizen - i.e. does the bank have your SSN and were these accounts ever subject to FATCA reporting?

Regarding capital gains, your obtaining Danish citizenship changes nothing. The only legal way to escape those taxes is to renounce US citizenship before selling the house. Not declaring the sale or not filing at all is of course an option.


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## Dail-K

No. I have never been asked for my SSN. The people I've talked to, bank personnel
, even tax officials here aren't aware that US citizen have to file taxes in the US ...people are amazed!!! most at least - some do know but that's the minority IMO. Declaring the sale? The thought never dawned on me...I recently bought a car should I have told anybody?


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## Nononymous

Sadly, if you are filing US tax returns, you would be expected to declare the sale of a primary residence, and as a single person pay tax on any gains over $250k. That is the rule. This knowledge may now cause you to change your approach to the question of US tax compliance! If you wanted to be seriously prudent about this, I would not sell the house until you have your Danish citizenship. Not because your becoming a dual citizen removes the US tax obligation - it never does - but because Denmark will not assist the IRS in collecting any taxes due against one of its own citizens, _if the tax debt is incurred after naturalization_ (double check that in the tax treaty). The chances of your being found out are extremely small, but you do have this theoretical vulnerability as a non-citizen in Denmark.

You are not required to declare the purchase of a car, but if you bought a valuable collectible car and sold it later for a gain, you would be required to declare and pay tax on the amount it appreciated - like a piece of art, or cryptocurrency, or any other form of investment.

I would also make it a practice to not discuss one's US citizenship anywhere near a bank or financial institution. In theory, once they know about it, they are obliged to ask for your SSN and subject your accounts to FATCA reporting.


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## Dail-K

Thanks, yes I should talk less.

I had an idea about the sale of the house - if I sold it for Bitcoin it's not a "capital gain" as such because I'm not taking a profit (a least that's not why I'm selling) I want to keep it as a long term investment. You can't take real estate with you if you want to relocate...

Also, you said :"..._if the tax debt is incurred after naturalization_ (double check that in the tax treaty) ". Which tax treaty would that be? 

Am I not making myself vulnerable (if I decide to stay under the radar) and start asking about what the rules are? I guess I could say "I have a friend who...."


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## Nononymous

Dail-K said:


> I had an idea about the sale of the house - if I sold it for Bitcoin it's not a "capital gain" as such because I'm not taking a profit (a least that's not why I'm selling) I want to keep it as a long term investment. You can't take real estate with you if you want to relocate...


I doubt that would fly. You sell the house, you realize a gain, doesn't matter what currency you choose to receive payment in - dollars, kroner, euro, bitcoin, gold bars, seashells or whatever. The sale is the taxable event. Basically your options here are pretty limited: pay US tax or break US law (by not reporting the sale) or renounce US citizenship before selling.



> Also, you said :"..._if the tax debt is incurred after naturalization_ (double check that in the tax treaty) ". Which tax treaty would that be?


The US-Denmark tax treaty. I just looked, Article 27.8 is the relevant bit. If you sold the house *after* becoming a Danish citizen then failed declare the gain, and if by some miracle the IRS found out about this and tried to collect, you would be protected. However, if you sold the house *before* becoming a Danish citizen, under the same scenario Denmark would be obliged to help the IRS collect on its bill.



> Am I not making myself vulnerable (if I decide to stay under the radar) and start asking about what the rules are? I guess I could say "I have a friend who...."


Depends entirely on whom you are asking! Keep yourself anonymous and keep your mouth shut around banks and other financial institutions and you'll be fine. If you have detailed questions, remember that lawyers are obliged to protect client confidence, but accountants and tax preparation firms are not.


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## Dail-K

Thank you so much! This has been really helpful. I have learned so much on each exchange here, really!

I appreciate your time and dedication to help others. I don't know how the point system works here, how can one give some "stars"?


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## Nononymous

No worries, anytime someone is saved from the clutches of the IRS or a US expat tax firm, a small amount of good karma is generated.

So overall you're not in the most straightforward situation.

If you were to become fully compliant with US tax obligations you could potentially face a bill for capital gains after selling your house (though I have no idea what your cost basis would be - it may depend on how the house was owned while your husband was alive). Similarly, if you now control any investments that were once in your husband's name, you'd want to check that they aren't something "toxic" from an IRS perspective, for example mutual funds that would require nasty PFIC reporting. Overall, some potential liabilities here that could make compliance complicated and even expensive.

At the same time, you have some vulnerabilities due to the fact that you are only a US citizen. In the extremely unlikely event that the IRS tried to collect on a debt over $51k, you could lose your passport, which is a problem for anyone living abroad. Furthermore, you currently live in one of the five countries where the government would be obliged to assist in collecting a debt from a US citizen who is resident but has not become dual. If your plan is to thumb your nose at the IRS, you would be in a much stronger position with Danish citizenship - even if you move to Mexico.

All that being said, you can probably stay off the radar forever, but you should at least be aware of these (hopefully hypothetical) risks going forward.


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## Moulard

Dail-K said:


> if I sold it for Bitcoin it's not a "capital gain"


If you sold it for Bitcoin you would potentially be hit capital gains tax twice. 

Once on the sale of the house, and then again on any gains made between the acquisition and redemption of the bitcoin.


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## Nononymous

Moulard said:


> If you sold it for Bitcoin you would potentially be hit capital gains tax twice.
> 
> Once on the sale of the house, and then again on any gains made between the acquisition and redemption of the bitcoin.


If you lost money on the Bitcoin transaction would it reduce the capital gains owed on the sale of the house?


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## Moulard

Assuming it occurred in the same tax year, yes.


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## Dail-K

That was my point for getting bitcoin for the house - I want to keep it as a long term investment. I wouldn't redeem it not for 4-5 years potentially. 

At this point the whole system is so shaky I don't want to have all my savings in the bank. With BTC I can keep some of it out of the bank. The house is my largest asset. My husband didn't trust the stock market or anything other than cash in the bank (and the house for security).


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## Bevdeforges

Technically speaking, if you receive Bitcoin for the sale of the house, you would have to report the sale at the quoted rate for Bitcoin on the date of the sale. Then, later on "cashing in" the bitcoin, you would declare the gain or loss on that original value at the date of the sale and the value at the date you cashed the bitcoins in.


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## Nononymous

This isn't really the forum for such advice, but putting your life savings / retirement fund into Bitcoin doesn't seem like the best idea. If any cash in the bank had been put into even the most basic index fund, there's be considerably more of it now. I'm not sure that not trusting "the system" is going to be a great plan going forward.


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## Dail-K

Thanks, I appreciate the advice! Yes I it would have been great to have invested in _something_ basic.


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