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. Of course, this isn’t always enough to track down all the necessary information. That’s why many overseas Americans file for an extension to October 15 or December 15. But which extension is right for you? In this article, we explain the difference between Form 4868 and Form 2350 to help you choose the extension that meets your expatriate tax needs.
What Is the Difference Between Form 4868 and Form 2350?
Form 4868 is used to apply for a standard extension to October 15. Form 2350, on the other hand, is intended to help new expatriates qualify for the Foreign Earned Income Exclusion. To use Form 2350, you must meet certain requirements, so read on to learn more about the differences between these two expat tax extensions.
Overview of Tax Extensions for US Expatriates
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.
October 15th – Standard Extension Using Form 4868
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.
December 15th – Special Extension Using Form 2350 or IRS Approval
US expats who need additional time to qualify for the Foreign Earned Income Exclusion can use form 2350 to request another extension. If you simply need more time to prepare your tax return after the October 15th extension, Americans overseas can request a discretionary 2-month extension from the IRS—but these expats will not use Form 2350.
Using Form 2350 to Qualify for the Foreign Earned Income Exclusion
If you recently moved outside of the US, you may 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 October 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 the IRS will inform you if they deny the extension.
Requesting an Extension to December 15 without Form 2350
Taxpayers living abroad needing more time to file their tax return past the October 15th deadline, can ask for a discretionary 2-month extension—even if you are not a new expatriate. 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 15th 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, including Form 2350). NOTE: This does not apply to FBAR.
To apply for the December extension, your letter needs to be postmarked by October 15th and can be mailed to:
Department of the Treasury Internal Revenue Service Center Austin TX 73301-0045
Keep in Mind, Discretionary Extensions Are Not Guaranteed
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.
What If I Owe Money on My Expat Tax Return?
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 Happens If I Don’t File an Extension or My Extension Is 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 charged interest on the 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.