US Citizens and Permanent Residents living abroad might qualify for an automatic 2-month extension to file a tax return – but to avoid interest, taxpayers must pay any balance due before the regular due date.
US Citizens Living Abroad and the Automatic 2-Month Filing Extension
According to the IRS instructions on form 1040, page 6, if you are living abroad and you work abroad, or you are stationed outside of the US in the military, you do not have to file form 4868 and you get two extra months to file your tax return and pay your taxes.
What many US Taxpayers who earn foreign income do not realize, however, is that they still must pay interest on any balance due that is not paid by April 15th.
Foreign Income Document Attachment
When you are unitizing this extension, you must attach a statement to your tax return stating that you qualify (this is also according to the IRS instructions located on page 6 of the 1040 instructions).
If you skip this part the IRS might assume that you are late in filing (and paying) and impose a “failure to file on time” penalty which is a pretty stiff amount when you have a balance due and you do not file the return on time.
If you did not send this attachment in with your return and you receive such an IRS letter, you can amend the return to include the required attachment and likely get out of this penalty. Be sure to act quickly as most letters from the IRS require action within several days.
Watch out for specific foreign filing requirements(!)
Sorry to be “so drama” – but this is important!
Penalties for blowing off or being late on your expat taxes could lead to some pretty ridiculous penalties. Late filed form 5471, 3520, 3520a, and late FBAR reports can lead to penalties starting from $10,000 each.
Form 3520a is due on the 15th of March(!) and needs it’s own extension.
If you call a “normal” state-side tax firm, they might tel you “nah, don’t worry about it, you owe no tax anyway”.
Fire them and get a tax preparer that specializes in expat taxes (like us, hint, hint).
Seriously though, waiting to the last minute, or waiting beyond the last minute when it comes to your expat taxes is a very bad idea.
Form 4868 for Foreign Income Filers
Remember that if you need more time to file your tax return, you can always file form 4868 which gives you an additional 6 months to get things filed.
Just like with the 2-month extension, with this one, you also must pay you balance due by the original due date to avoid late penalties.
You can also sometimes get the 2 month extension on top of the 6 month extension. To do this, you must write the IRS with your reasons for being late and get their approval.
Even with this extension, form 3520a and FBAR reports (and maybe others) are still due at their normal due dates.