At the beginning of the year, filing US tax returns is often item number one on many Americans’ to-do lists. However, what happens if tax documents are not ready, or if you need to get organized before filing? The IRS offers options for taxpayers who need extra time to file. Expats, expand your extension education by reading our guide below!
Even though tax returns are generally due April 15th if you’re living in the US and June 15th if you’re living outside the US (unless it falls on a weekend or holiday), when you file for an extension, you will have an additional six months to file your tax returns, making the extended due date of these returns October 15th. Extensions are filed using IRS Form 4868. While an extension grants additional time to file your return, tax payments are still due April 15th. Don’t forget: any penalties and interest are calculated from the original due date of your return.
Penalties and Interest on the American Expatriate Tax Return
Three penalties are assessed on late taxes: failure to file, failure to pay, and interest on the tax due.
The failure to file penalty is 5% for each month the tax return is late, up to a maximum penalty of 25%, based on the date you file. The failure to pay penalty, based on the amount you owe, is 0.5% for each month the tax is not paid in full. Interest is also calculated based on the amount you owe, each day your balance is not paid in full, and based on the IRS’s published interest rates, which are set quarterly.
Options for Tax Deadline Extensions
Expats are offered an automatic extension to June 15th to file their American expatriate tax return, so long as they are living or have their primary place of business outside the US and Puerto Rico on the regular due date of the returns, or if they are on military service duty outside the US and Puerto Rico.
If, however, you are not ready to file by June 15th, you can request an extension by timely filing Form 4868 with the IRS. The deadline would then be extended to October 15th as well. Any tax due must be paid by April 15th to avoid interest and penalties.
The final option further extends the tax deadline for each American expatriate to December 15th for calendar year taxpayers. The process to apply for this additional extension is to send a letter that outlines the reason you, as an expat, need the additional two months to complete your tax return. This document must be sent to the IRS by October 15th. At that point, the IRS would approve the extension, but you will not be notified by it. The IRS does not send any approval confirmations; however, it is recommended to keep proof of the mailing for record keeping purposes.
Finally, the FBAR (Foreign Bank Account Report), which is a mandatory filing for any US person with combined foreign account balances over $10,000, has a deadline of April 15th, with an automatic extension to October 15th. A penalty is levied for failing to file the FBAR. The civil penalty for each non-willful violation is $10,000 each. However, if the violation is found to be willful, the penalty is the greater of $100,000 or 50 percent of the amount in the account for each violation; and each year you didn’t file is a separate violation. That can get expensive quickly!
Let Us Help You Meet the American Expatriate Tax Deadline
Extensions are great as a last resort, but filing on time is even better! Less paperwork, no penalties or extra interest and fees, just the satisfaction of being done for this tax year. Get started with Greenback today.