Extension of Time To File Tax Return
Did you know that American citizens living abroad are automatically given a two-month extension to file their taxes? That’s right, the deadline for expats to file US federal taxes is not April 15th, but June 15th. Expats have two extra months to gather all the information and necessary forms they need as well as to sort out any foreign income tax allowances and exclusions they may qualify for.
However, since taxes can be overwhelming, expats can still file a tax extension until October 15th if they still need a little more time. And to get an extension, you need to fill out IRS Form 4868.
IRS Form 4868
To fill out IRS Form 4868, you need the following information:
• Your social security number or tax ID number (and your spouse’s if you are married and filing jointly)
• Your mailing address
• Your 1040, 1040EZ, or 1040 tax form from your prior year’s tax return
• Any tax documents for the current year
If your financial situation has not changed much, it is a good idea to use information from your prior year’s forms (1040 etc.) to make a rough estimate of what your tax form might look like this year.
If You Owe Expat Taxes
When you fill out form 4868 and it looks like you will owe the IRS some money, that is not a desirable situation, because you will have to pay that amount to the IRS by April 15th in order to avoid being charged interest and penalties.
Unfortunately, the tax extension only extends the filing date and does not account for whether you owe money or not. You can mail in a check with IRS form 4868 or pay electronically via the Electronic Federal Tax Payment System. Tax services or banks may also be able to wire money to the IRS but keep in mind that these services usually incur an extra fee.
Estimated Tax Liability
Although the filing extension gives you more time to file your return, it doesn't give you extra time to pay the taxes you owe. So you must estimate how much you owe and pay the amount due when you file Form 4868.
If you do make a payment, include it in the Payments section of your Form 1040 when you file. If you don't pay the full amount you owe, the IRS will charge you interest on the unpaid balance until you pay the full amount.
If you don't pay at least 90% of the amount you owe, you might also be subject to a late payment penalty. The penalty is usually half of 1% of the amount owed for each month, up to a maximum of 25%.
If you don't file either your return or Form 4868 by April 15, you'll be subject to a late filing penalty. The penalty is 5% of the amount you owe for each month, up to a maximum of 25%.
That’s basically all there is to filing a tax extension. American expatriates who live or work abroad already get a two month extension on filing their taxes and can use the extra time to see if they qualify for any credits or exclusions. If more time is needed, they can fill out form 4868. Payments owed to the IRS are still due before the April 15th deadline, however. You can pay the tax amount you owe in several ways, including checks, electronic payments, or even by wiring funds to the IRS.
If you are overwhelmed or just plain tired of filling out the Electronic Tax System, filling out form 4868, or just don’t understand the foreign tax credits or exclusions remember that we offer free tax consultations and we are there to help you.