Uncle Sam is reminding its citizens who live and work outside its borders that their tax deadline is rapidly approaching.
While the bulk of taxpayers had to get their tax returns filed by May 17 this year, U.S. citizens and resident aliens who live abroad—as well as those with dual citizenship—have to file by June 15.
Just like their fellow citizens inside the U.S., those living abroad have to file a tax return with the IRS every year. They usually automatically get a two-month extension of time to file, putting the deadline this year at June 15.
Stateside taxpayers got an extension from April 15 to May 17, but foreign taxpayers didn’t receive another extension beyond the normal postponement.
Even if a foreign-based U.S. taxpayer doesn’t expect to owe tax thanks to tax benefits such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, they’re still required to file an income tax return by the deadline. The tax benefits are only available if they file a return.
The Internal Revenue Service says taxpayers claiming the special June 15 deadline should attach a statement to their return if one of two conditions apply:
- The taxpayer’s tax home and abode are both outside the U.S. and Puerto Rico, or
- The taxpayer was serving in the American military outside the U.S. and Puerto Rico on the regular due date for the return.
Even with the prior extension of time, some taxpayers may not be able to get their return in on time. Individual taxpayers who need more time to file can complete and mail Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Click here to find out where to mail the form.
Businesses that have to file income tax returns should file Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.
Report foreign accounts and other assets
An important part of filing for foreign-based income tax filers is reporting any worldwide income to the IRS. This can include income from foreign trusts and foreign bank or securities accounts.
Taxpayers with this kind of income will generally have to include Schedule B to their tax return. Schedule B’s Part III asks the taxpayer for information on any foreign accounts, and requires the taxpayer to report the country where each account is located.
Some taxpayers may also have to include Form 8938, Statement of Foreign Financial Assets. U.S. citizens, resident aliens and some nonresident aliens usually have to report specified foreign financial assets on this form if the total value of those assets are above certain limits. For details, see the directions for Form 8938.
Another layer of reporting is required for taxpayers who have either an interest in, or signature or other authority over foreign financial accounts with a total value of more than $10,000 at any time during 2020. These taxpayers must electronically file a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts with the Treasury Department.
Form 114 is only available through the BSA E-filing System website.
While the original deadline for filing the annual FBAR report was April 15, FinCEN gives those who missed the deadline an automatic extension until Oct. 15 to file. There’s no need to request the extension.
Foreign-based filers should remember that when reporting income or deductible expenses, the amounts must be reported in U.S. dollars.
FinCEN Form 114 and IRS Form 8938 both require the use of a December 31 exchange rate for all transactions regardless of the actual rate on the date of the transaction.
For information on exchange rates, refer to Foreign Currency and Currency Exchange Rates.
Reporting for expats
Those taxpayers who gave up their U.S. citizenship or ceased to be lawful permanent residents of the U.S. during 2020 have to file a dual-status alien tax return, attaching Form 8854, Initial and Annual Expatriation Statement.
A copy of Form 8854 should also be mailed to this IRS address:
Internal Revenue Service
3651 S IH35 MS 4301AUSC
Austin, TX 78741
The form should be mailed by the due date of the tax return, including any extensions.
For more information, see the instructions for Form 8854 and Notice 2009-85, Guidance for Expatriates Under Section 877A.
More time for some members of the military
Members of the American military can qualify for even more time to file and pay their taxes. If either of these two conditions apply, they can get an additional extension of 180 days to file and pay any tax due:
- They serve in a combat zone or have qualifying service outside of a combat zone or
- They serve on deployment outside the United States away from their permanent duty station while participating in a contingency operation. This is a military operation designated by the Secretary of Defense or results in calling members of the uniformed services to active duty (or retains them on active duty) during a war or a national emergency declared by the President or Congress.
Individuals serving in a combat zone or a contingency operation in support of the Armed Forces are also granted extended deadlines. This includes Red Cross personnel, accredited reporters and civilian personnel acting under the direction of the Armed Forces in support of their forces.
Spouses of those who served in a combat zone or a contingency operation generally are entitled to the same deadline extensions, however, some exceptions apply. Details and other military tax information is available in IRS Publication 3, Armed Forces’ Tax Guide.
More information for foreign-based filers may be found in About Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad; and About Publication 519, U.S. Tax Guide for Aliens.
Trussell Tax