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One of the perks of living abroad is an automatic two-month extension to file your taxes. While most Americans have to scramble to complete their taxes by April of each year, expats don’t have to file until June.
Of course, even that may not be enough time to get everything ready for filing. Expat taxes are nothing if not complicated. Fortunately, Americans living overseas can request additional extensions by filing Form 4868 or Form 2350. But what is the difference between Form 4868 and Form 2350? Which should you file?
In this post, we’re going to answer those questions and more. Here’s what you need to know.
Form 4868 and Form 2350 are both IRS forms used to request a filing extension. However, there are several key distinctions between them. 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.
Let’s look at each one in detail.
Form 4868 is the standard IRS form all taxpayers can use to request a filing extension for their tax return. If the IRS accepts this request, the filing deadline will be extended to October 15 (October 16 in 2023). This will give taxpayers an additional six months to file after the original April deadline. For expats, it will really be a four-month extension from the June deadline for Americans living abroad.)
Virtually everyone is eligible for this extension. To qualify, you only have to file Form 4868 by the original due date for your tax return. You don’t even have to explain why you need more time. In most cases, the IRS will grant your request with no questions asked. (The IRS will only contact you about your request if it is denied. If you don’t hear from the IRS, you can assume that they granted the extension.)
Form 4868 will automatically extend the filing deadline for the FBAR along with your tax return.
Form 2350 is only for Americans living abroad. Using this form, expats can request more time if needed to qualify for the Foreign Earned Income Exclusion (FEIE). To claim this tax benefit, you must pass either the physical presence test or the bona fide residence test. Both tests require you to live outside of the US for a certain amount of time.
If you recently moved abroad and need more time to meet the requirements of either test, you can file Form 2350 to request a filing extension. If granted, this will extend your filing deadline until 30 days after the date when you will become eligible for the FEIE. You can then claim the Foreign Earned Income Exclusion on your tax return.
To file this form, you must reasonably expect to qualify for the Foreign Earned Income Exclusion in the foreseeable future. Just like Form 4868, Form 2350 must be filed by the original deadline for your tax return. And also like Form 4686, the IRS will only contact you if your extension request is denied.
Form 2350 is only for Americans who need more time to qualify for the FEIE. If you simply need more time to prepare your tax return after the October 17 extension, Americans overseas can request an additional discretionary two-month extension from the IRS. This would extend the filing deadline to December 15.
To qualify for this extension, you must first file Form 4868 for the October 15 standard extension. Once you have filed Form 4868, you will need to mail a letter to the IRS before October 15 explaining why you require another two months to file.
For example, you could inform the IRS that you are waiting to receive documentation about an investment. Alternatively, you might need more time because your host country’s tax assessment will not be available until after October 17.
You will mail your letter to the following address:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0045
Because this extension is discretionary, 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. As with forms 2350 and 4686, the IRS will only contact you if your request is denied.
You cannot request this discretionary extension if you have already filed Form 2350. This extension also does not apply to the FBAR.
It’s important to note that an extension to file is not an extension to pay. You must estimate and pay your taxes by the original filing deadline in April. (This is true regardless of whether you live in the US or abroad. The automatic two-month extension to June does not apply to the deadline for payment.)
Failing to pay your taxes on time will result in penalties and interest. The good news is that if you overestimate your taxes and pay more than you end up owing, you will receive a refund once you file your return.
If you miss the filing deadline without an extension being granted, you will be subject to late filing penalties and interest on any taxes owed. If you think you will need more time to file, you should request an extension as quickly as possible to avoid this.
If, for any reason, you’re hit with a penalty, there is a 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.
Beyond this, you can use the Streamlined Filing Compliance Procedures. This is a tax amnesty program that allows Americans living overseas to catch up on their tax obligations without facing the usual penalties. To use this program, all you have to do is:
Once you’ve completed these steps, you will be in compliance with IRS regulations. In some cases, you may even receive a refund for previous years.
Don’t wait to use the Streamlined Filing Compliance Procedures! If the IRS contacts you about your delinquency before you start the process yourself, you may lose the privilege of amnesty. In that case, you will have to pay the standard penalties.
What is the difference between Form 4868 and Form 2350? We hope this guide has helped you understand the important distinctions between these tax forms. If you still have questions, we’d be happy to answer them. In fact, we can even file your expat taxes for you.