May 04, 2014

By Joshua Ashman, CPA

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Last Update: March 2020

There is a common misunderstanding among U.S. expats regarding their true filing deadline.  Many expats believe that the traditional April 15th deadline is the critical deadline and that, absent filing a proper extension with the IRS (Form 4868) by April 15th, one will be penalized for the untimely filing of their return should their return be filed after this date.  The truth is, however, that all U.S. expats (defined as anyone living outside the U.S. on April 15th) are entitled to a two month automatic extension without the need to file anything with the IRS.   As a result, all expats are allowed to file their returns by June 15th without the need to seek IRS approval. 
The IRS grants you an automatic two month extension to file your taxes if you are located outside the U.S. on the due date of your tax return (April 15th) and you satisfy either of the following criteria:  (1) you live outside the U.S. and your main place of business or post is outside the U.S. or (2) you are in the military and stationed outside the U.S.  The nice thing about this automatic extension is that you do not need to file a request with the IRS.  No forms are required.   In the case of a married couple filing jointly, it is sufficient that only one spouse satisfy these requirements.
There are, however, two caveats that should go along with this statement.  The first being that despite the automatic extension, taxpayers taking advantage of this extension should understand that there is no extension of time to pay your tax.  Therefore, if you end up owing tax for the 2013 calendar year and do not make a payment by April 15th, you will be charged interest on the late payment.  The current interest rate charged by the IRS on late payments is 3%. The second caveat is that taxpayers taking advantage of this extension must attach a statement to their tax return stating that it has been filed pursuant to this special extension.


Should you require additional time to file beyond the June 15th deadline, you can request an extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.  Once this request is filed, the IRS automatically grants an extension through October 15th.   Form 4868 can be filed electronically by accessing IRS e-file using your home computer or by using a tax professional who has access to the system.  For those who need even more time to file (beyond the October 15th deadline), there is a special procedure pursuant to which the IRS may grant additional time.
In addition, to the two extensions discussed above, U.S. expats can request an additional extension until December 15th.  In order to request this additional extension, you must be located outside of the U.S. and you must write a letter to the IRS explaining why you need these additional two months.  This letter must be filed by October 15th. Keep in mind that the IRS has complete discretion when deciding whether to grant you the additional two month extension (i.e., it is not automatic like the first extension).


One important rule to keep in mind is that whether you choose to take advantage of the automatic 2 month extension, or file for the six month extension you still need to pay the tax you owe to the IRS by April 15th  This is because the extension only extends the due date by which you must file your return, but not your payment of tax.  If you end up owing tax and did not pay the tax by April 15th, the IRS can charge you interest (and in certain cases late payment penalty). Accordingly, there is a need to figure a rough estimate of your tax liability by the date the extension is filed in order to pay in your tax balance with the extension.

April 15th is also the due date of the 2013 first quarter estimated tax payment. In general, quarterly estimated taxes are required to be paid if your total 2013 tax liability (which isn’t filed until April 15, 2014) exceeds $1,000. Given the challenges in estimating your tax liability before actually preparing the tax return, the IRS provides a safe harbor rule based on your prior year tax liability (the safe harbor is met if 90% of the current year tax, or 100% (or 110% for high earners) of the prior year tax is paid in over the course of the year.


Most important, keep in mind that if you’re a U.S. expat and have a bank account or other financial assets outside the U.S., you may also have another filing requirement in addition to your tax return – the Foreign Bank Account Reporting (FBAR) reporting requirement.  This is a special form that is not part of your tax return and must be filed with the U.S. Treasury by June 30th.  No extensions are granted.  The filing requirement is triggered only if the total combined balance of all your non-US accounts (including pension, savings and investment accounts) exceeded $10,000 at any given time during the year.  Should you have such a requirement, the appropriate form to file is Form 114 (the prior year form, Form TD F 90-22.1, is now absolete) and it must be filed electronically.

As a U.S. expat is absolutely critical that your taxes be prepared and filed accurately and timely.  With the ever increasing scrutiny places on the foreign banking activities of U.S. citizens, you want to make sure you’re not taking on unnecessary risks when dealing with U.S. tax compliance.  Filing an expat return is a complicated matter and can often not be properly handled by the “do-it-yourself” software currently available on the market.  Here, at Expat Tax Professionals we help thousands of expats each year with their U.S. tax return filing, tax planning and all related U.S. tax matters.  Contact us today to have your taxes handled by a real professional.

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