Americans and Green card holders abroad share their experiences on the overwhelming responsibility of filing their US taxes in a foreign country. The sad thing is, missing the deadlines can result in penalties and interest, making taxpayers pay more than they need to.
Do Americans living outside of the US still have to file taxes?
Yes! The US has a citizenship-based taxation system, meaning if you are still recognized as an American citizen, then you need to prepare a tax return every year, regardless of where they live. Even if you earn all your income in a foreign country and pay taxes there.
To avoid double taxation, expats can take advantage of deductions and credits like:
- Foreign Earned Income Exclusion (FEIE): Allows qualifying expats to exclude a certain amount of foreign-earned income from the IRS.
- Foreign Tax Credit (FTC): Helps offset US taxes with taxes already paid to a foreign country.
- Foreign Housing Exclusion (FHE): Can reduce reportable taxable income by deducting housing expenses in the foreign country.
These benefits will greatly help expats in lessening their burden of paying taxes since it could save them hundreds or even thousands of bucks.
Key Tax Deadlines for Americans or Green Card holders from abroad
If you already didn’t know, US expats are given an automatic extension on their filing deadline! Unlike Americans in the US, expats have different filing deadlines to accommodate time zone differences and international financial complexities. Here are the most important dates:
Regular Filing Deadline (April 15)
For most US taxpayers, the regular deadline for filing Form 1040 (US Individual Income Tax Return) is April 15. But this only applies if April 15 is on a business day. If it’s a weekend or even a holiday, the deadline will be moved to the next business day.
Automatic Extension for Expats (June 15)
The good news is the IRS automatically grants US expats a two-month extension, moving the deadline to June 15. This also apple with military personnel stationed outside the US
Extended Filing Deadline (October 15)
Expats who need more time on their taxes because of other complications can request an extension until October 15. They just need to file Form 4868 or the Application for Automatic Extension. Don’t forget to submit this by June 15 to qualify for the extension.
Final Deadline with Special Request (December 15)
In some cases, expats can request an additional two-month extension until December 15 by sending a written letter to the IRS explaining why they need more time. Approval is not automatic, and the IRS decides on a case-by-case basis.
What If You Can’t Pay Your Taxes by the Deadline?
Even if you can’t pay your taxes in full by the due date, it’s important that you file your US tax return on time to avoid failure-to-file penalties. If you owe taxes but can’t afford to pay, consider these options:
- Set Up an IRS Payment Plan: The IRS offers short-term and long-term installment plans to help taxpayers pay off their balance over time.
- Apply for an Offer in Compromise: In rare cases, the IRS may allow taxpayers to settle their tax debt for less than the full amount owed.
- Maximize the Foreign Tax Credit (FTC): This credit can help reduce US tax liability based on taxes paid in a foreign country.
How to Apply for a Tax Extension as a US Expat
- Filing Form 4868 (Automatic Extension to October 15)
E-file through tax software like TopTax or IRS Free File
Mail to the IRS (ensure it’s postmarked by June 15).
Submit with a payment using IRS Direct Pay (select “Extension” as the reason for payment).
- Requesting an Additional Extension to December 15
This needs to be awritten request to be sent to the IRS before the October deadline. This request must be in letter format explaining the reason for the extension. Be sure to include the taxpayer’s name, Social Security Number (SSN), and address.
What Happens If You Miss the Tax Filing Deadline?
The severity of missing the deadline depends if you owe taxes or not. If you don’t owe taxes, then good news! There’s no penalty for late filing. But if you are due to pay taxes, there are a list of fees you need to be mindful about.
- Failure-to-File Penalty: You are charge 5% per month (up to 25%) of the unpaid taxes.
- Failure-to-Pay Penalty: 0.5% per month of unpaid taxes.
- Interest Charges: The IRS charges interest on unpaid balances but be careful because this compounds on a daily basis.
Also, if you have a tax refund, you need to file within three years to claim your refund. After that, any unclaimed refunds are forfeited to the IRS.
Special Considerations for Expats
US expats have additional tax obligations beyond standard filing requirements, including:
FBAR Deadline (April 15, extended to October 15 if needed) – If your foreign bank accounts total more than $10,000 at any point in the year, you must file FinCEN Form 114.
FATCA Reporting (Form 8938) – Expats with foreign assets exceeding certain thresholds must file Form 8938 (Statement of Specified Foreign Financial Assets).
