What do I do if I miss the tax filing deadline? Can I request for a filing extension?
These are just some of the most common US expat tax filing questions that you might have, and if you want answers, then you’ve come to the right place.
Filing your US expat taxes can involve a long and challenging process, but if you know what to do, the task can be more seamless and pain-free for you.
In this guide, we’re going to tackle some of the common US expat tax filing questions and the answers that will help make the process easier for you.
Ready? Let’s get right to it.
1. Do I need to file my US tax return even if I’m an American living abroad?
If you’re a US citizen or Green Card holder and if your annual income exceeds the minimum threshold, then the answer is yes.
US taxation doesn’t tax you based on your place of residence, but rather on your citizenship.
This means that regardless of where you earn your income, the currency you earn it on, and whether or not you pay taxes in the country you reside in, you will still need to file your taxes in the US if your income goes above the current thresholds.
To file your US expat taxes, you will need to submit Form 1040 US Individual Income Tax Return and report other income items including your foreign dividends and interest income and foreign royalties (among other things).
If applicable, you might also need to file additional reports such as the Foreign Bank Account Report (FBAR) to report assets that you hold overseas.
2. How do I know if I should file the Foreign Bank Account Report (FBAR)?
If you are a nominee, owner, or if you have control over the distribution of a foreign account’s funds and if the combined amount of all your accounts exceed $10,000 at any given time within the calendar year, then you are required to file the FBAR form.
This is something you need to be mindful of, especially if you’re thinking of starting your own business overseas.
Foreign financial accounts include your bank and security accounts, particular overseas retirement arrangements, and any accounts you have that are located outside of the 50 US states.
Let’s say you’re a US citizen living abroad, and you have one checking account and a savings account at a bank in that country with the total combined balance amounting to $15,000 in 2018.
In this scenario, you will need to file an FBAR for 2018, even if each of your foreign accounts holds only $7,500 each.
To file your FBAR, you need to do it electronically through the Financial Crimes Enforcement Network (FinCEN) Bank Secrecy Act or BSA E-Filing System.
Once you land on the FBAR form filing page, you have the option to do online form preparation and file as soon as you fill out all the required fields or download the PDF form and work offline at your own pace.
Keep in mind that if you are required to file your FBAR but fail to do so, miss the due date, or misreport your foreign accounts, you may be subjected to penalties ranging up to $10,000 or more for each violation.
That being said, the safest way for you to avoid FBAR thousands of penalties is to determine if you need to file way before the deadline.
3. What are the filing schedules and deadlines I should be aware of?
You should know that your expat tax filing schedules are a little different from Americans living within the US – with April 15 as the filing due date for US residents – to help you avoid any confusion and accidentally miss your deadline.
As an expat, you can qualify for an automatic two-month extension, meaning that your tax return due date for the 2018 calendar year is June 17, 2019.
However, you are still required to pay your taxes on April 15, even if you’re filing your returns by June 17. If you fail to pay your taxes on time, you’ll be charged interest on your unpaid amount.
You can also request for another expat tax filing extension of up to October 15, but the same rules still apply, which means you still need to pay your taxes on April 15 and the applicable interests when you miss your tax payment deadline.
You’ll also get more comprehensive information about your expat tax due dates and schedules by going on the IRS website and checking the Form 1040 instructions.
The good news is, there are times when the tax benefits that are available for expats can result in no taxes owed for you.
This, however, depends on your situation, so if you still get income from US source or reside in a country that has lower taxes than the US, then you might still owe US taxes.
4. What do I need to do if I haven’t filed my tax returns in years?
The first thing you need to do is gather all your expenses and income documentation, which may mostly be documents from the country you live in, including your housing expenses, mortgage interest paid, statements of income, and more.
This is to ensure that you have the necessary documents to file your taxes as soon as possible.
You can also join the Streamlined Foreign Offshore Program (SFOP), but first, you need to ensure that you’re eligible.
Here are some of the steps you need to follow to become eligible for the SFOP.
- Submit accurate and complete delinquent tax returns for the past three years using Form 1040 and other required details about your returns like Forms 8938 and 3520.
- To ensure that your returns are submitted under the SFOP procedure, you need to write “Streamlined Foreign Offshore” in red at the top of the first page of each information return, and amended or delinquent tax.
- Accomplish and sign an original copy statement that you can find on the Certification by Form 14653 or US Person Residing Outside of the US that certifies your eligibility for the SFOP and that you have filed all your require FBARs.
The statement also certifies that your failure to file your tax returns, pay all taxes, submit all your required information returns, and report all your income is a result of non-wilful conduct.
Along with the requirements for the general eligibility criteria, once you accomplish all the steps and conditions, you can now file for the SFOP and catch up on your delinquent tax returns.
What’s Next?
Filing your US expat taxes can take a toll on your time and energy, but by knowing the answers to commonly asked questions, the process can be smoother and pain-free for you.
After all, asking questions and doing a bit of research for the right way of doing things will improve your knowledge of the process, plus, you’ll be more equipped to wade into the expat tax filing process.
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