If you owe money to the IRS, you might be wondering when it's due (especially with the filing extensions granted you as an expatriate). It's easy to be confused, as an expat, about the deadlines for U.S. taxes. In this article we will cover the deadlines for tax returns and FBAR forms, as well as how to file for an extension if needed.
Regular Tax Filing Deadline
All Americans know "tax day" as April 15th. And while this is normally the case, the tax filing deadline will be pushed to the following Monday if the 15th falls on a weekend or a holiday. This year, Emancipation Day falls on the 15th of April, so the filing deadline for the 2010 tax year is April 18th, 2011.
Federal Expatriate Extension, When and How it Applies
As an expat, your necessary tax documents may arrive at different times than you were accustomed to in the U.S. To accommodate you, the IRS automatically extendsyour filing deadline to June 15th of every year. This automatic kindness does not extend to money owed, however. Any money you owe the IRS will still be due on April 15th (or the following Monday if April 15th lands on a weekend or a holiday). In other words - you are allowed an automatic 2-month extension to file your return and pay federal income tax if you are a U.S. citizen or resident alien without incurring late penalties. Even though you are allowed an extension to file, you will have to pay interest on any tax not paid by the regular due date of your return (ie April 18th in 2011).
Any payments made after June 15 would be subject to both interest charges andfailure to pay penalties.
Without filing, you may not be aware of how much money, if any, you will owe. Regardless, interest on money owed will begin to accrue as of April 16th (or April 19th in 2011). If you expect to owe money to the IRS, it is wise to file as early as possible to avoid a higher payment at a later date.
Your first quarter estimated tax for 2011 is also due to be made on 4/18/11 using form 1040 ES. Please note that underpayment of estimated taxes by as much as $1,000 or more for the year will generate the underpayment penalty - even if all payments were made on time. If your self-employment income exceeds your previous year income by more than 10%, contact your tax advisor to revise the estimated payment amounts.
You can extend until 10/15/11 your expatriate tax return on or before 6/15/11 by filing Form 4868 with the appropriate box checked. If you need to extend your expatriate return beyond that date in order to qualify for the foreign earned income exclusion you need to file Form 2350.
If you do not file the necessary form to extend your personal return and end up owing taxes, failure to properly extend the form will result in the large penalty of 5% per month of the tax due up to a maximum penalty of 25% of the tax due plus interest. Best to not miss filing that extension due to this high penalty.
Even with the two month extension, it is possible that your forms may not arrive in time. As an expatriate, if you find that you need more time, you can request an additional extension to October 15th. To file for this extension, simply have your accountant file Form 4868 on your behalf. You can also complete the form yourself if you choose to. However, as with all things tax related, it's usually worth the expense to hire a professional.
Filing an FBAR Form
In addition to filing with the IRS, many American expats are required to file a foreign bank account report (referred to as an FBAR). The FBAR is required for any expat who has over $10,000 in foreign bank accounts at any point (even one day) during the year. Anything over $10,000 (and this figure applies to all foreign accounts combined) must be reported. The specific number of the FBAR is FinCEN 114. This form is due (to the Treasury, the FBAR is not filed with the IRS) by (as of 2017) Apr 15.
Many expats falsely assume that they do not need to file an FBAR. "Foreign account" is not limited to standard checking and savings accounts, however. You must also take into account your mutual funds, trusts, and brokerage accounts. Also, your business accounts may need to be included. Contact an international tax expert if you are unsure of how to proceed. And do not put the calculating off until the last minute. If you have multiple accounts, this can be a very complicated process.
Special Date for 2011, Offshore Voluntary Disclosure Initiative
For any of you who have fallen behind in previous years, 2011 offers a chance to come clean. Don't continue to lose sleep over your unpaid taxes and unreported overseas accounts. Disclose your undisclosed foreign accounts and unpaid taxes to the IRS and U.S. Treasury by August 31st of 2011. If you take advantage of this unique opportunity, you'll have to pay a fine, but you'll come under the IRS's good graces and will bypass criminal prosecution. To find out if this special circumstance applies to you, contact a tax professional who specializes in expatriate issues.
For 2011, the dates to remember are April 18th, June 15th, August 31st and October 15th. Unless you have to, though (because you haven't received your forms), do not wait until the deadline to file your forms and disclose your accounts. Make it easier on yourself (and avoid unnecessary interest and fees) by filing at the first available opportunity. Be confident in the information filed by hiring an international tax expert to prepare all of your tax forms for you.
I.J. Zemelman, EA is the founder of Taxes for Expats