American taxpayers living and working outside the U.S. should file their federal income tax return by June 15. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship and foreign nationals living outside of the US. Qualifying for the June 15 extension A taxpayer qualifies for the June 15 filing deadline if:
Both their tax home and abode are outside the United States or Puerto Rico, or
They are serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return.
Qualifying taxpayers should attach a statement to the return indicating which of these two situations applies. Claim US tax benefits as an Expat Many taxpayers living outside the U.S. qualify for tax benefits, such as the Foreign Earned Income Exclusion under IRC section 911 and the Foreign Tax Credit under section 901, but they are available only if a U.S. return is filed. The IRS encourages expats with families to check out expanded tax benefits, such as the Child Tax Credit, Credit for Other Dependents, and Credit for Child and Dependent Care Expenses, and claim them if they qualify. Though taxpayers abroad often qualify, the calculation of these credits differs depending upon whether they lived in the U.S. for more than half of the tax year. For more information, see the instructions to Schedule 8812, Credits for Qualifying Children and Other Dependents, and the instructions to Form 2441, Child and Dependent Care Expenses. Reporting required 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, Interest and Ordinary Dividends, to their Form 1040 series 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 Specified 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. For details, see the instructions for this form. Reporting foreign financial accounts to Treasury Certain foreign financial accounts, such as bank accounts or brokerage accounts, must be reported by electronically filing Form 114, Report of Foreign Bank and Financial Accounts (FBAR), with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The FBAR requirement applies to any US person with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during the year. The IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is available through the Bank Secrecy Act E-Filing System or through third-party providers and filers. The deadline for filing the annual FBAR is April 15. However, FinCEN grants those who missed the April deadline an automatic extension until Oct. 15. There is no need to request this extension. See FinCEN’s website for further information. 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 FINCEN Form 114 and IRS Form 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. Making tax payments To ensure tax payments are credited promptly, the IRS urges taxpayers to consider the speed and convenience of paying their U.S. tax obligation electronically. The fastest and easiest way to do that is via their IRS Online Account, IRS Direct Pay, and the Electronic Federal Tax Payment System (EFTPS). These and other electronic payment options are available at irs.gov/payments. Reporting for expatriates Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the U.S. during the year must file a dual-status alien tax return and attach Form 8854, Initial and Annual Expatriation Statement. A copy of Form 8854 must also be filed with the IRS by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details. Extensions beyond June 15 Taxpayers who can’t meet the June 15 due date can request an automatic six-month extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The IRS encourages anyone needing additional time to make their request electronically. Several electronic options are available at IRS.gov/Extensions. Businesses that need more time must file Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns. Extensions for military personnel Members of the military stationed abroad or in a combat zone during tax filing season may qualify for an additional extension of at least 180 days to file and pay taxes. More information, like who qualifies, can be found by reading Extension of Deadline – Combat Zone Service Q&As. Spouses of individuals who served in a combat zone or contingency operation are generally entitled to the same deadline extensions with some exceptions. Extension details and more military tax information is available in IRS Publication 3, Armed Forces’ Tax Guide. Other resources:
Need help with expat tax issues? Contact Whin Global for help
Tax help and filing information is available anytime on IRS.gov. The IRS website offers a variety of online tools to help taxpayers answer common tax questions.
For more specific expat tax advice and for expat tax return preparation, contact a CPA at Whin Global.
Whin Global is an expat tax services company. Whin Global is based in Columbus, Ohio but serves clients globally. Get in touch with us to learn more.