Americans living abroad and tax filing deadlines
Americans living abroad who are required to file a US tax return must submit Form 1040 on or before June 15. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship.
The IRS provides an automatic two-month deadline extension to submit your US tax return. However, payments of taxes are still due on or before April 15 to avoid interest on late payments. Penalty for late payment starts accruing the day after June 15. For those who are still paying into the US social security system, pay your self-employment tax quarterly.
Benefits and qualifications
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 expat taxpayer files a U.S. income tax return.
Remember that taxpayers qualify 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 on the regular due date of their tax return also qualify for the extension to June 15. A statement is generally recommended to be attached to the return if submitting your tax return before June 15 or an extension form is not already filed with the IRS.
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 to their Form 1040 tax returns. 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.
Foreign accounts reporting deadline
Separate from reporting specified foreign financial assets on their tax return, taxpayers with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during the tax year, must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). 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.
The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is April 15, but FinCEN is granting filers who missed the original deadline an automatic extension until October 15, to file the FBAR. There is no need to request this extension.
Report your foreign accounts 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 December 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.
Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States 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 Internal Revenue Service, 3651 S IH35 MS 4301AUSC, Austin, TX 78741, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85 PDF, Guidance for Expatriates Under Section 877A, for further details.
More time is available
Extra time is available for those who cannot meet the June 15 date. Individual taxpayers who need additional time to file can request a filing extension to Oct. 15 by filing Form 4868.
Expats and foreign nationals-owned Businesses that need additional time to file income tax returns must file Form 7004 by the original due date
Combat zone extension
Members of the military qualify for an additional extension of at least 180 days to file and pay taxes if either of the following situations applies:
They serve in a combat zone or they have qualifying service outside of a combat zone or
They serve on deployment outside the United States away from their permanent duty station while participating in a contingency operation. This is a military operation that is designated by the Secretary of Defense or results in calling members of the uniformed services to active duty (or retains them on active duty) during a war or a national emergency declared by the President or Congress.
Deadlines are also extended for individuals serving in a combat zone or a contingency operation in support of the Armed Forces. This applies to Red Cross personnel, accredited correspondents, and civilian personnel acting under the direction of the Armed Forces in support of those forces plus contractors.
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.
States tax issues: filing deadlines, FEIE, FTC, Residency
States may have different requirements and filing deadlines. Therefore, please refer to the specific US state for when to file an extension and when penalties and interest start accruing. Also, does your state conform with the IRS with regard to the foreign earned income exclusion and/or foreign tax credit? Are you still a tax resident in that state? Are you liable for any trailing state tax liabilities?
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, expat tax guidance, 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 and serves clients globally. Get in touch with us to learn more about our value proposition.