Ready or not, here it comes! The June 17 US tax deadline is just days away, so we’ve compiled an overview covering everything Americans abroad need to know to be ready for this important deadline (and also what to do if you’re not!)
First, Let’s Cover the Basics:
- US taxpayers living outside the US are granted an automatic 2-month extension of time to file their personal tax returns, which extends the due date to June 15 (June 17 in 2019 for 2018 taxes)
- Most people living abroad need to file a US tax return which includes all worldwide income, and the complexity reaches far beyond what Americans living in the United States have to contend with.
Some US expats are under the impression that because they’re living abroad, and potentially paying taxes and filing tax returns in another country, that they aren’t required to file in the US. That’s a common, and sometimes costly, misconception. An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit. These may substantially reduce or eliminate your US tax liability but are only available if an eligible taxpayer files a US income tax return.
Filing this return for Americans abroad will require any US information received (such as Forms W-2 or 1099), as well as information regarding foreign income, expenses, and potentially taxes paid. Items that are helpful include pay stubs, foreign bank or financial institution statements, and, if self-employed, information about foreign social security that may have been paid (as there are Social Security Totalization agreements in place with numerous countries). Finally, if you’ve filed a foreign tax return, you’ll need copies of that to accurately prepare your return as well.
While the focus here is on US Federal Tax Returns, it’s important to note that some US expats also have state filing requirements, so additional information could also be required. State returns have the same due dates as the federal (assuming no extensions of time to file have been granted).
All of this information is needed to accurately prepare a complete US tax return.
Obtaining Information for Foreign Accounts and Assets
Federal tax law requires US citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires US citizens to report the country in which each account is located.
It can sometimes be tricky for Americans abroad to obtain this information, as it may not be readily attainable due to the fact that foreign accountants, brokerages, banks, and other organizations may need to be contacted and consulted.
In addition to reporting the income items from foreign banks and financial institutions on their tax returns, all US persons who have a financial interest or signature authority over anyone or multiple foreign financial accounts wherein the value is over $10,000 any time during the US tax year, must file FinCEN form 114 (known as an FBAR) each year.
Who is a US Person?
- Legal Resident
- Green Card Holder
- H1b Visa Holder
- L1 Visa Holder
- A trust formed under the laws of the United States
- An estate formed under the laws of the United States
- An entity created or organized in the United States under the laws of the US government
The due date to file FBAR forms for tax year 2018 is April 15, 2019 as well, although there is an automatic extension is until October 15, 2019. Note that a request for an extension is not required for the FBAR (though it is for the tax return itself if you need time after the June deadline). So, you can file your FBAR with your tax return in June, or you may elect to wait until October, but it can be easy to overlook the requirement after your returns are all filed.
In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, US citizens, resident aliens, and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.
While Form 8938 is similar in terms of FBAR reporting, it can add to the time required to prepare and review a tax return before filing.
Note: One point to be cognizant of is that the IRS requires most tax information to be in US currency, so conversions of the foreign amounts to US equivalents must be completed.
What Happens if I Can’t Meet the June Deadline?
Considering all the items and documents that are required to prepare a US expatriate tax return, knowing if there is an option to obtain a bit more time is important. If you happen to find yourself in a situation in which you need even more time to file, it is important to be sure to file an extension by the deadline. So, if you’re concerned you cannot make the automatic June filing deadline, get in touch with Greenback for help with filing an extension for free.
Want to Get Ahead of the Expat Tax Deadlines?
We’ve got just what you need! Download our free e-book, “The Expat’s Guide to US Tax Deadlines + Extensions” to know all your options when it comes to US expat tax deadlines. Need a little more help? Our team of expat experts is here to help you take the hassle out of your US expat taxes.