One of the perks of living abroad is that, while stateside Americans scramble to complete their taxes by April 15 each year, expats are granted an automatic two-month extension on their expatriate tax returns. Of course, one of the difficulties of being an expat is that tracking down all of the necessary information to report to the IRS can sometimes take time and may be based on the host country’s tax schedule. That’s why many overseas Americans file for an extension to October 15 and can also request an extension through December 15.
What are the expatriate tax return deadlines?
June 15th – Automatic Extension
US taxpayers living outside the US get an automatic 2-month extension of time to file their personal tax return and FBAR. This extends the due date to June 15th. No form is required to be filed to get this extension of your tax return, but you will need to indicate on your tax return that you were living outside the US to avoid penalties.
NOTE: This year, FBAR was due April 15th, but IRS granted auto extension to October 15th. Next year, FBAR must be filed by June 15th and you will have to file extension to October 15th.
October 15th – Standard Extension
For US taxpayers abroad who need more time to file past June 15th, you can then file Form 4868 and get an extension until October 15th. This includes an extension on FBAR as well.
NOTE: For 2017, the October deadline is technically October 16th because the 15th falls on a Sunday.
What if you can’t complete your expatriate tax return by October 15, even with the extension?
Taxpayers living abroad needing more time to file their tax return past the October 15th deadline, can ask for a discretionary 2-month extension. In order to qualify for this extension, you must have filed Form 4868 for the October 15th standard extension which was due June 15th.
If you meet this qualification, then you will need to mail a letter to the IRS before the October 15th deadline asking for and explaining why you require an additional 2-month extension (for example, if you are waiting to receive documentation about an investment, or if your host country’s tax assessment will not be available in time to meet the October 15 deadline).
The IRS will only notify those denied the discretionary extension. If you don’t hear from the IRS, you can assume that they granted the extension. The discretionary 2-month extension is not available to those who filed for any other special extension (see more below on new expats filing Form 2350). NOTE: This does not apply to FBAR.
To apply for the December extension, this needs to be postmarked by October 15th (October 16th in 2017) and can be mailed to:
Department of the Treasury Internal Revenue Service Center Austin TX 73301-0045
Are extensions guaranteed for your expatriate tax return?
This final December extension is considered discretionary, meaning that taxpayers are not guaranteed an additional two months simply because they ask for more time. You will need to offer a good explanation in your letter to explain why you are delayed in completing your expatriate tax return. Keep in mind that if you filed Form 2350 instead of Form 4868 to request your original October extension, you will not be eligible for this additional two-month extension.
I recently moved abroad and have not yet qualified for the Foreign Earned Income Exclusion. Are there any other ways to extend my filing deadline?
If you recently moved outside of the US, you may actually qualify for special tax treatment. If you file Form 2350 prior to the due date of your tax return, which is June 15th if you are out of the country, then you are allowed an additional two-month extension past the regular extended filing date of Oct. 15th.
Form 2350 is a specific extension opportunity for Americans abroad who expect to file Form 2555 (Foreign Earned Income), but need additional time to meet either the Physical Presence Test or Bonafide Residence Test in order to qualify for the Foreign Earned Income Exclusion.
In other words, you may qualify for additional time to file simply because you are a new expat. Please note that you cannot file Form 2350 more than once per overseas move.
If your extension is granted, you will generally be given 30 days to file after meeting either test. You will not receive a confirmation that the extension is granted, but again, if they deny the extension they will inform you.
What if I owe money?
It’s important to note that extensions of time to file are not extensions of time to pay your taxes due. If you have a balance due and you file your return after the original due date of the return, you will be subject to penalties and interest, even if you properly file an extension. If taxes are owed, payments need to be paid by April 15th or else interest will start accruing until taxes are paid.
Failure to pay penalties and statutory interest will be assessed from the due date of the return to the day you pay the tax. If you expect to owe money on your tax return, you can make a payment to the IRS with your extension to avoid penalties and interest.
What are the implications of not filing an extension or an extension being denied?
If you do not request an extension for more time or your extension is denied, this results in your return being late. You could be subject interest accrual on taxes owed as well as the failure to pay penalty and the failure to file penalty (up to 25% of your tax due). It’s important if you need more time that you request an extension immediately and also if you owe taxes, make a payment to the IRS immediately to prevent interest and penalties.
If you fail to file FBAR by the October 16th firm deadline, there are 2 different types of penalties for not filing an FBAR by the due date – Non-Willful and Willful.
- Maximum Penalty Non-willful: $10,000. No penalty shall be imposed if the violation was due to reasonable cause and the amount of the transaction or the balance in the account at the time of the transaction was properly reported. For “non-willful” penalties (forgot to file, etc), they can assess up to $10,000 per account.
- Maximum Willful violations: The greater of $100,000 or 50% of the balance of the account at the time of the violation
If for any reason, you’re hit with a penalty there is first-time penalty abatement (FTA) waiver. The IRS may grant relief to taxpayers from failure-to-file, failure-to-pay, and failure-to-deposit penalties if certain criteria are met. The policy behind this procedure is to reward taxpayers for having a clean compliance history; everyone is entitled to one mistake.
Need to make a payment to the IRS in advance of the first tax deadline? Reference our helpful how-to document here.
Need Help With Your Expatriate Tax Return?
If you don’t think you’re going to be able to make the upcoming deadline or you are unsure about your US expat taxes, we can help! Please contact us today and we’ll be in touch within 1 business day.