[anothermouse]

I am British, and am married to an american. My wife moved to the UK and has never worked since. I had no idea about her obligation to file anything. She's been here for over a decade.

Like a lot of people we use a joint bank account. My salary, and anything else goes in there.

A couple of years ago I sold my flat in central London, and had 400K (600K USD) in there at various points. I have no idea how to bring my wife into compliance, as if I do, she will be expected to hand over 25% of the maximum balance of this account for every year it was undeclared to a maximum of 5 years. I.E. 125% of the maximum balance!

She remains unaware, and I don't file for her. We'd risk losing our house (brought with the proceeds of the previous sale), if I attempt to fix this. I live in absolute dread of the IRS, and what they may do to our happy family.

[thisone]

If you are both concerned, she can file back FBARs with a letter of explanation as to why she hadn't filed them (I had to do the exact same thing). I wasn't fined, and I was scared as hell.

Yes, this is one person's story. Personally, if you can, I'd get in touch with a tax solicitor and get a real professional opinion on your options, including how to insulate your assets in the case of any idiocy by the US.

One thing to keep in mind is that as stupid and horrible these laws are, they aren't meant for us. They're meant for real, actual tax cheats, and FINCEN has more interest in them than someone who's been ignorant and is now trying to make it right.

[soft_dev_person]

> they aren't meant for us

I'm pretty sure child pornography laws weren't meant for teenagers sending nude snaps to each other, either.

[cylinder]

I'd stay under the radar. I have dual citizen friends (Australia) who have been there for decades and don't file and don't have a clue about it. They visit US frequently. This law deserves no respect.

[ssmoot]

I don't know if this applies to you, but state-side the sale of an asset wouldn't be counted as income.

According to this: http://time.com/money/2803550/income-taxes-on-home-sale/

If you lived in your previous home for at least 2 years, then you'd take it's original sale price plus closing/brokerage/etc costs as your "basis". Then take your later sale price subtracting those same costs. You get a $250,000 credit on profits.

So to me (a complete layman who's maybe not very good at taxes), that means if I buy a house for $200,000 plus 5% closing costs, my original expenses were $210,000. I later sell it for $450,000 minus 5% closing costs. That's $427,500. I've made $217,500 for holding onto the asset for two years. I should probably play the lottery. ;-)

Because I'm under the $250,000 single filing credit ($500,000 for joint filing couples, but I'm not sure how that'd work in your case since you're not a US citizen), I don't owe anything.

Say I did really well and made $400,000 in pure profit though (selling my $210,000 in the neighborhood of $600,000+).

You still get the credit so your taxable profit is $150,000 (assuming the joint filing credit wouldn't apply). That's taxed as capital gains. Not income. Which is a regressive tax. The highest rate is 20%. That'd be a $30,000 tax bill.

This all assumes you even put her on the title for the old property. If you didn't, then the sale doesn't mean anything necessarily. That she had access to the money through a joint banking account after the sale might complicate things?

In general I've found the IRS to be very helpful. They're not interested in prosecution (IME). They just want their due. And they're pretty flexible in making that happen.

Once upon a time I owed $15,000 in taxes from previous contract work, and hadn't filed in a few years because I was scared of the consequences. That's about the worst move. By not filing I racked up something like $1,000 in non-filing penalties each year as well as paying 10% interest on the amount owed.

When I finally did get my act together and contact them they waived further penalties, suspended the interest on the amount owed and set me up with a $300 a month payment plan.

There are a lot of horror stories out there. And bad things do happen to good people. But I'd like to imagine that most cases work out more like mine.

If I were in your position, I'd make it a priority to talk to a tax attorney, being sure they don't have a reporting obligation. It probably won't cost more than a few hundred dollars just to get some advice. Then I'd get a second opinion. Once I had some confidence I had a grip on the situation and how it was likely to play out, I'd talk to the IRS on my own, get on a payment plan if necessary, and put it behind me.

I'm not sure it applies in your situation, but stateside, simply avoiding filing properly is about the worst thing you can do. It doesn't just go away on it's own. That only makes it worse (interest and penalties).

But you know, I'm just some random guy on the internet. Figure out if tax attorneys have a reporting obligation and talk to one maybe? Good luck!

[anothermouse]

The problem is not that I made a profit in selling my house, it is that my wife had money in a bank account at all.

As she didn't file, she didn't know that you need to file an FBAR annually for each foreign account. And the penalties for not doing so are those mentioned above 25% of the balance a year for 5 years.

and there are plenty who do file who don't know to file an fbar too.

[thisone]

The issue with the FBAR is the transfer of the money from the house into a bank account.

If the money was in an account with the US citizen's name on it for any amount of time, such that the sum of all accounts with the citizen's name was over $10,000, all accounts must be reported.