Karp v. United States: A Good-Faith $0 Estimate Won’t Void Your Tax Extension
For Americans abroad who file an automatic extension and owe little after the FEIE or Foreign Tax Credit, the Karp v. United States ruling removes the fear that a small estimate error could undo it.
The bottom line: you do not have to calculate your tax to the dollar before filing an extension, and a reasonable estimate of zero is fine when credits or overpayments cover what you owe. In Selwyn Karp and Barbara Adams-Karp v. The United States, decided May 21, 2026, the U.S. Court of Federal Claims held that a couple who estimated $0 in total tax liability on Form 4868 still received a valid automatic six-month extension, even though their actual gross liability was $131,201. The court found the estimate was reasonable and made in good faith, prior overpayments already covered the bill, and the extension stood, confirming the couple’s $154,720.45 refund. For the many Americans abroad who owe little or nothing after the Foreign Earned Income Exclusion or the Foreign Tax Credit, this removes a real filing-season anxiety.
What the Court Ruled
Selwyn Karp and Barbara Adams-Karp sought a refund of a large overpayment on their 2016 return. To buy more time, they filed Form 4868, the application for an automatic six-month extension, and listed their estimated total tax liability as zero, reasoning that overpayments carried forward from prior years already covered the bill. The government argued that the zero estimate was so flawed that it rendered the extension “null and void,” making the later refund claim untimely.
Judge Molly R. Silfen rejected that argument. The key findings:
- The Karps made “a technical error in estimating net rather than gross tax liability,” but “correctly estimated that they would owe zero,” and the error “was not unreasonable enough to make the automatic extension void.”
- A taxpayer needs only a “bona fide and reasonable estimate” based on the information available at the time, the standard set in Crocker v. Commissioner. A perfect figure is not required.
- The couple’s carryover overpayments were deemed available against the 2016 liability, so an estimate of zero was, in substance, correct.
- The IRS itself offers extension methods that require no estimate at all, including paying online. The court said the law “disfavors setting that sort of trap for the unwary taxpayer.”
The court granted the Karps summary judgment, denied the government’s motion, and confirmed they were entitled to their refund.
Why This Matters for Americans Abroad
Many U.S. taxpayers abroad file an extension every year and legitimately owe nothing once the FEIE or FTC is applied. The fear has always been that a small slip on the estimate line could unravel the extension and expose a return to late-filing penalties.
Consider an American teacher in Spain who earns $90,000, fully excluded under the FEIE, and files Form 4868 showing $0 expected liability to reach the October deadline. If a small amount of foreign interest later nudged her actual gross liability above zero before credits, the old worry was that the IRS could call the estimate “unreasonable,” void the extension, and treat her October filing as late. The Karp ruling signals that a good-faith estimate grounded in the FEIE and her credits holds up, and her extension stands.
Three takeaways stand out:
- A reasonable, good-faith estimate is enough. You are not expected to calculate your final tax to the dollar before filing an extension.
- Credits and prior overpayments count toward what you owe. If withholding, the FTC, or carried-forward overpayments cover your liability, an estimate of zero can be entirely reasonable.
- There is often a simpler path than the form. Paying online and designating the payment as an extension secures the same six-month extension with no estimate required, which removes the risk entirely for many expats who owe nothing.
What You Should Do Next
The ruling protects good-faith filers, not careless ones. Keep your own extension airtight.
- File your extension on time. Expats abroad get an automatic extension to June 15 and can reach October 15 by filing Form 4868 or paying online. Review the full calendar of expat tax deadlines.
- Make a documented, good-faith estimate. Base your total tax liability figure on the information you have, and keep the records that support it.
- Pay any expected balance by the April deadline. An extension extends time to file, not time to pay, and interest accrues on unpaid amounts from April.
- Use the no-estimate route if you owe nothing. If your liability is covered by payments and credits, pay online and mark it as an extension to skip the estimate line altogether.
- Catch up if you are behind. If you have unfiled returns, the Streamlined Filing Compliance Procedures let many expats get current penalty-free.
Worried a filing slip could cost you?
The information in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are complex and change frequently. Consult a qualified tax professional regarding your specific situation before taking any action.
