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Answer to question in your para 2:
insurance settlement because of a work related injury. While reviewing where tax filing has been submitted as married, filing jointly, and included her income included.Between CY 1964 and CY 2009 form 2555 was used for foreign wages as it was earned income. In CY 2010 form 1116 was used for foreign income as it was pension based not earned income. In CY 2011 I received a significant foreign insurance settlement because of a work related injury. While reviewing where and how this award fit into my return, I found “treaty based return” and how it appeared to be applicable to my wife’s foreign pension. Forms 8833 and 8840 were included as a part of CY 2011 Tax Package submision.
The Danish Government does not currently recognize dual citizenship. Danish citizens who leave Denmark sort of “sign out.” They no longer pay any Danish tax and they keep their passport. If and when they return, the Danish government revalidates their presence without any affirmative action’s being initiated by the returning Dane. This person is required to take certain actions without regard to how long they may be in country…. No one ask’s. They must register their address with authorities, obtain a local drivers license, register vehicles and property and fully pay back taxes on money earned outside the country. Before they can work if they must obtain a “tax card” which proves to a perspective employer that they are registered in the local tax office.
My wife has never filled out Homeland Security form I-407 and turned it in a Consular Official or Immigration Officer. The Department of Homeland Security has never determined in fact that she has abandoned her lawful permanent resident status.
My wife has never been subject to a final administrative order under the Immigration and Nationality Act and left the United States because of that order.
My wife obtained her “Green Card” in 1964. It has never been revoked or judicially or administratively determined to have been abandoned.
Ref(NNN) NNN-NNNNb) -7 and Dual Status: In our case my wife returned to Denmark for more than one reason; primarily to help care for her aging parents, not to avoid US tax law on average annual salary of less than $25,000 earned income. In our case to avoid US Tax is not plausible since all earned income subject to the US IRS Code would have been negated by submission of form 2555.
As written in my initial question the 5-10 year timeline on the IRS Code clock does not begin until after official notification is received by proper US authorities. Unlike Homeland Security, IRS does not identify “proper US .authorities” and how they are to be informed. My wife has never complete any forms for the IRS and sent them to any “proper authorities” concerning her change in status and initiate the starting of the IRS expatriation time clock.
Based on what I think I understand, my wife does not have to sign and submit the IRS form 8854, her pension income is excluded by the Tax Treaty and her status with both the IRS and Homeland Security remains RA/LTR.
You are correct in your interpretation, or at least that is how I would interpret it. Especially since you have been filing your returns as joint, so the IRS would consider her to still be a RA/LTR.
It does not matter how Denmark treats you. Your wife is not a US citizen, she is a resident alien, so even though Denmark might "revalidate" her presence, she is still required to file a US income tax return with you, as the US still believes she is a RA/LTR.
I wish you the best with your parents! Taking care of parents is often more difficult than taking care of children.
If you have any more questions, please let me know! Thank you for the excellent rating! It was a pleasure to assist you!