Though filing taxes can be complicated for expats, we have some good news. Extensions are available for your overseas tax return – some are even automatic! As an American, you are likely accustomed to having the April 15th deadline in mind as soon as the year ends, but those living abroad have a number of different dates to keep in mind.
Update for 2020: Due to the COVID-19 pandemic, the IRS has extended the normal April 15th and June 15th deadlines. All tax filings and payments are now due July 15, 2020. However, we recommend you file as early as possible.
Automatic Extension Until June 15th
If you are living abroad, you are granted an automatic two-month extension to file your U.S. income tax returns, which pushes the deadline to June 15th. This applies if, as of April 15th, you are living, have your main place of business, or are on military/naval service duty outside the United States and Puerto Rico.
It’s important to note if you’re currently living in the U.S., the automatic extension does not apply to you. Your tax return and any payments due need to be submitted by April 15th.
Extension By Request Until October 15th
If, however, you are not ready to file by June 15th, you can request another extension by timely filing Form 4868 with the Internal Revenue Service. The deadline would then be October 15th.
Additional Extension Until December 15th
The final option available is an extension that would further push the tax deadline to December 15th for expats. The process by which you would apply for this additional extension is to send a letter outlining why you need the additional two months to complete your overseas tax return. This document must be sent to the IRS by October 15th. At that point the IRS would approve the extension; however, you will not be notified. The Internal Revenue Service does not send any approval confirmations. So, for recordkeeping purposes, you’ll need to keep proof that you mailed the letter.
On the Other Hand
If you owe on your returns, the deadline for payment is April 15th regardless of filing extensions. Beginning on that date, interest will be assessed on amounts due, even if your overseas tax return is otherwise filed timely. If you do not file by your applicable extended deadline, you may be charged penalties for failure to file and failure to pay – in addition to the interest owed.
Fortunately, most expats do not owe anything to the U.S., but if you are one of the few who do, you should make a payment before the April deadline to avoid the accumulation of interest. A good rule of thumb is if you owed taxes last year and your situation is similar this year, it is likely that you will owe again and should make a payment to be safe.
Need to make a payment to the IRS? Reference our helpful how-to document here. And you can learn more on making payments: Most Important Facts for Expats Who Owe Money to the IRS.
Penalties and Interest
The failure-to-file penalty is 5% for each month the tax return is late, up to maximum penalty of 25%, based on the date you file. The failure-to-pay penalty is based on the amount you owe and is 0.5% for each month the tax is not paid in full. And finally, interest accumulates daily on the amount based on the IRS’s interest rates, which are set quarterly.
Penalties are also assessed for not sending estimated payments during the year of the tax return. So if you know your income will be subject to US income tax, we recommend you work with an expat tax professional at Greenback to estimate your taxes and prepare estimated tax payments accordingly.
What About FBAR?
The FBAR is a mandatory filing for any U.S. person with combined foreign account balances over $10,000. The deadline for FBAR is April 15th, with an automatic extension to October 15th. There is also a penalty for failing to file the FBAR. The civil penalty for each non-willful violation is $10,000. 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. Plus, you may face criminal charges.
Are You Ready File Your Expat Tax Return? Need an Extension?
Whether you’re ready to file or need more time, our expert accountants can help. Get started with Greenback today, and we’ll help you make sure you’re not overpaying on your overseas tax return.