The Internal Revenue Service (IRS) recently published a tax filing reminder to United States citizens and resident aliens living abroad. Although the tax filing was originally due on April 18, the IRS allows an extension through June 15 in one of two situations. The first applies for those who have their residence outside of the United States. The second, for those serving in the military. The tax payer must indicate which situation applies in a statement attached to their return in order to receive this extension.
It is important to note the government generally requires an income tax return filing for those living abroad, even if their tax obligation is minimal or eliminated due to tax benefits. Benefits that could reduce these obligations include the Foreign Earned Income exclusion or Foreign Tax credit.
Those in this situation can benefit from a review of the basics of the IRS publication. Four key reminders within the publication include:
- Report foreign assets. Tax payers must report any foreign income and assets as well as any income earned within the United States. Those with any interest in a foreign asset that exceeds $10,000 at any time during the 2017 tax year must also file a Report of Foreign Bank and Financial Accounts (FBAR) with the Treasury Department of Financial Crimes Enforcement Network (FinCEN).
- Extension available. Additional, automatic extensions can apply. Those who wish for additional time to meet their tax obligations can request an additional extension through October 15, 2018. However, the interest on any tax due will likely accumulate during the extension period. The interest rate is currently set at 5 percent and compounds daily from the April 18 deadline.
- Convert currency. Report the income and assets in U.S. dollars.
- Rules for expatriates. Those who have relinquished U.S. citizenship are still required to file with the IRS. Generally, this involves a dual-status alien tax return.
These are just a few of the rules required for tax compliance when living abroad. Anyone that is attempting to navigate these rules is wise to seek legal counsel to better ensure full compliance.