Taxpayers Abroad Must File by June 15; Extensions Available; New Filing Deadline Now Applies to Foreign Account Report

Taxpayers living and working abroad that they must file their 2016 federal income tax return by Thursday, June 15.

The special June 15 deadline is available to both U.S. citizens and resident aliens abroad, including those with dual citizenship. For those who can’t meet the June 15 deadline, tax-filing extensions are available and they can even be requested electronically. In addition, a new filing deadline now applies to anyone with a foreign bank or financial account required to file an annual report for these accounts, often referred to as an FBAR.

Here is a rundown of key points to keep in mind:

Most People Abroad Need to File An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income exclusion or the Foreign Tax credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return. A taxpayer qualifies for the special June 15 filing deadline if both their tax home and abode are outside the United States and Puerto Rico. Those serving in the military outside the U.S. and Puerto Rico also qualify for the extension to June 15.

Be sure to attach a statement indicating which of these two situations applies. Interest, currently at the rate of four percent per year, compounded daily, still applies to any tax payment received after the original April 18 deadline. For details, see the When To File and Pay section in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. Special Income Tax Return Reporting for Foreign Accounts and Assets

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.

Choose Free File

Automatic Extensions Available Taxpayers abroad who can’t meet the June 15 deadline can still get more time to file, but they need to ask for it. Their extension request must be filed by June 15. Automatic extensions give people until Oct. 16, 2017, to file; however, this does not extend the time to pay tax. An easy way to get the extra time to file is through the Free File link on IRS.gov. In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an extension on Form 4868. To get the extension, taxpayers must estimate their tax liability on this form and pay any amount due. Another option for taxpayers is to pay electronically and get an extension of time to file. IRS will automatically process an extension when taxpayers select Form 4868 and they are making a full or partial federal tax payment using Direct Pay, the Electronic Federal Tax Payment System (EFTPS) or a debit or credit card. There is no need to file a separate Form 4868 when making an electronic payment and indicating it is for an extension. Electronic payment options are available at IRS.gov/payments. International taxpayers who do not have a U.S. bank account should refer to the Foreign Electronic Payments section on IRS.gov for more payment options and information. Combat Zone Taxpayers get More Time Without Having to Ask for it Members of the military and eligible support personnel serving in a combat zone have at least 180 days after they leave the combat zone to file their tax returns and pay any taxes due. This includes those serving in Iraq, Afghanistan and other combat zone localities. A complete list of designated combat zone localities can be found inPublication 3, Armed Forces’ Tax Guide, available on IRS.gov. Various circumstances affect the exact length of the extension available to any given taxpayer. Details, including examples illustrating how these extensions are calculated, can be found in the Extensions of Deadlines section in Publication 3.

New Deadline for Reporting Foreign Accounts

Starting this year, the deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is now the same as for a federal income tax return. This means that the 2016 FBAR, Form 114, was normally required to be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 18, 2017. But FinCEN is granting filers missing the original deadline an automatic extension until Oct. 16, 2017 to file the FBAR. Specific extension requests are not required. In the past, the FBAR deadline was June 30 and no extensions were available. In general, the FBAR filing requirement applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2016. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-filing System website. Report in U.S. Dollars Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

Both Forms 114 and 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.

More Information Available Any U.S. taxpayer here or abroad with tax questions can refer to the International Taxpayers landing page and use the online IRS Tax Map and the International Tax Topic Index to get answers. These online tools group IRS forms, publications and web pages by subject and provide users with a single entry point to find tax information. Taxpayers who are looking for return preparers abroad should visit the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.

More information on the tax rules that apply to U.S. citizens and resident aliens living abroad can be found in, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, available on IRS.gov.

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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2012 Foreign Earned Income Exclusion Increased By IRS

The IRS for 2012 has increased the Expatriate Foreign Earned Income Tax Exclusion to $95,900.  This could save single person (without any available tax credits)  up to an additional.$616 in US taxes on their 2012 return over what they might pay on the same foreign earned income on their 2011 return.

Remember an an expatriate living abroad on 4/17/12 you got an automatic extension to file your return until 6/15/12.  You can get a further extension to file the return until 10/15/12 by filing form 4868 prior to 6/15. If you owe any taxes at that time  interest and penalties will continue to accrue (at a rather low rate) until those taxes are paid. Remember form TDF 90-22.1 (FBAR) must be filed to report your foreign financial accounts by 6/30/12 for 2011. It cannot be extended for any reason.

This combined with the fact the IRS increases the foreign housing exclusion or deduction each year for expats will provide additional benefits to those who live and work abroad for 2012.  It just keeps getting better for expatriates so long as all of the special reporting forms (with high penalties for not filing) such as TDF 90-22.1, 8938, 3520, 8865, 5471, etc. are all filed in a timely manner. It is noteworthy that none of these forms are actual forms that produced more taxes, they are strictly informational and if filed, will result in no adverse consequences to the expat taxpayer.  Read more on our website at www.TaxMeLess.com 

US Expats Living Abroad can Get An Additional 2 month Extension of Time to File 2010 returns until December 15th.

US Expats living abroad on 4/15, get an automatic extension to file  their returns until 6/15. On June 15th  if you file Form 4868 an expat can get an additional extension until October 17th.


Now expats can secure an additional extension of time to file their return until December 15th,  if they send in a letter by October 15th requesting an additional two months of time to file their 2010 income tax return. We strongly recommend the letter be sent by certified mail return receipt since you will not hear back from the IRS unless your request is denied.  You must state the reason(s) you need the additional time in the letter.  The letter should be mailed to: Department of the Treasury , Internal Revenue Service Center, Austin, TX 73301-0215. You can read more about this additional extension request on page 4 of   IRS publication 54.

US Expatriate Tax Return Due Dates

• Your US expatriate tax return is due 6/15/11 if you lived and worked abroad on 4/15/11 for tax year 2010.  It can be extended until 10/15/11 if an extension is filed before that date. Please contact us if you wish assistance filing that extension or wish to determine how much needs to be paid in (if any tax is due) at that time to stop interest and penalties from accruing.
• Your FBAR Form - TDF 90-22.1  (foreign bank account and financial account reporting form) must be received by the IRS by 6/30/11 for the tax year 2010 and cannot be extended for any reason. There is a $10,000 penalty that may be imposed for late filing.
• Your required forms for foreign corporations, foreign partnerships and LLCs,  and disregarded foreign entities must be filed by the regular or extended due date for your personal tax return.
• Your Form 3520 for foreign trusts must be filed separately from your personal tax return, but is due by the extended due date of your personal tax return.

We have done over 5,000 expat and international tax forms for clients in over 50 countries around the world. We have the expertise, experience and professional expertise which is difficult to find. Please call or email us if you need assistance at ddntax@gmail.com