For expatriates living in nations like Brazil, China, the U.K., or Saudi Arabia tax time can quickly sneak up on a taxpayer. When you are living outside of the American media bubble, it can be easy to become immersed in the culture that surrounds you and to pay less attention to U.S.-based events and obligations. As far as taxes go, this level of cultural immersion is often a problem as expats can find themselves scrambling to make a timely filing at the last minute or miss the filing deadline entirely.
If you are an expat and have not yet considered your 2016 taxes which will be filed during the 2017 filing season, the time to do so is now. While you have more time to file than a taxpayer living in the United States, the taxes of expats are frequently more complex and require more time. Expatriates may need to consider tax treaty provisions to minimize the impacts of double-taxation. U.S. taxpayers living abroad are also more likely to need to make offshore account disclosures through FBAR or FATCA.
Deadlines for Expats Filing U.S. Tax Returns
Most expats are aware that, provided they satisfy certain tests, as a foreign resident they automatically have additional time to file taxes. Taxpayers who qualify as foreign residents automatically have until June 15, 2017 to file their taxes. Furthermore, an additional six-month extension can be requested pushing the tax filing deadline to October 16, 2017. Taxpayers who require an additional six-month extension can request it by filing IRS Form 4868.
However, it is important to note that the extension of time to file beyond the regular April 18, 2017 due date is exactly that and no more. That is, if taxpayers who owe taxes and fail to make a timely tax payment, will also end up owing interest on the unsatisfied tax balance. Interest is imposed for each month or partial month the taxes remain unpaid. Needless to say, interest can quickly aggregate and become and extremely expensive proposition.
Expats May Need to File FBAR
Individuals living abroad are far more likely to hold assets in foreign bank accounts. When an American citizen or taxpayer holds $10,000 or more in covered foreign accounts, he or she must file a Report of Foreign Bank Account (FBAR). Taxpayers who fail to file FBAR or make incomplete disclosures when they have an obligation to report can face a penalty of $10,000. This applies to accidental noncompliance. If the taxpayer is believed to have been willful and intended to avoid compliance, penalties can escalate to the greater of 50 percent of the account balance of $100,000. The due date for FBARs now aligns with the regular tax filing due date of April 18, 0217
Additional Offshore Disclosures via FATCA may also be Needed
Even if you make a disclosure under FBAR, an additional offshore account disclosure under FATCA may also be required. In other words, filing FBAR does not satisfy a FATCA obligation and vice-versa. Some accounts may need to be disclosed on both reports.
U.S. expatriate taxpayers living outside of the United States must file IRS form 8938 when their assets exceed certain thresholds. This threshold will vary on the basis of both tax filing status and residency for the tax year. Since it can be difficult to assess which assets are covered, it is essential for U.S. expats to seek guidance. The failure to seek guidance can open the door to significant offshore penalties. Typically, FATCA is filed at the same time as one’s tax return.
Work with U.S. Tax Help to Address Offshore Disclosures and Expat Taxes
If you have concerns about your U.S. taxes while living aboard, CPA Ted Kleinman and U.S. Tax Help may be able to assist. For decades, Ted has assisted expats with an array of tax obligations. Ted can assist with income tax filings for expats. He can also assist with FBAR and FATCA concerns.
To schedule a free initial review of your expat tax concerns, please call (541) 923-0903 or contact U.S Tax Help online.