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April 11, 2013

Tax Extensions, Penalties and Due Dates for US Expatriates

  • Though expats get an automatic extension to file until June 15th, 2013, for their 2012 tax return, if any taxes are owed they must pay those in by April 15th, 2013 to avoid penalties and interest.
  • Expats can get a further extension of time to file their 2012 return up to October 15th, 2013 by filing form 4868 prior to 6/15.
  • Your FBAR (TDF 90-22.1) for required for reporting foreign financial accounts (including bank accounts, many foreign pension accounts, foreign stock brokerage accounts, and other various foreign financial accounts) must be received by the IRS by June 30th , 2013 for the 2012 year. It cannot be extended for any reason.  The penalty for late filing can be $10,000 or more.
  • In most instances, if you need to amend an income tax  return to report unreported income or expenses it can be done up to three years from the date it was originally filed.
  • The statute of limitations never runs out on any tax year until you file a tax return for that year. Best to always file a tax  return to cause this statute to run out.
  • You have until 4/15 to open your IRA and fund it even though your tax return is extended for 2012. Remember you must have earned income in excess of the foreign earned income exclusion you take on Form 2555, in order to even be eligible to make a regular IRA or Roth IRA contribution.  You are also limited by your total income or if covered by a US corporate pension plan.
  • Penalties:
    • The late filing penalty is 5 percent per month of all unpaid taxes due with the return when finally filed up to a maximum of 25 percent.  If you file late, but have already paid in all taxes due, you will incur no penalty.
    • The  Late payment of tax penalty is 1/2 percent per month and interest that is adjusted quarterly which has been running at 2 to 3 percent per annum.

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