On June 12, 2017 the IRS released IR-2017-105 reminding taxpayers living and working abroad that they must file their 2016 federal income tax return by Thursday, June 15.
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The special June 15 deadline is available to both U.S. citizens and resident aliens abroad, including those with dual citizenship.
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For those who can’t meet the June 15 deadline, tax-filing extensions are available and they can even be requested electronically.
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In addition, a new filing deadline now applies to anyone with a foreign bank or financial account required to file an annual report for these accounts, often referred to as an FBAR.
Most People Abroad Need to File
An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income exclusion or the Foreign Tax credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return.
A taxpayer qualifies for the special June 15 filing deadline:
- if both their tax home and abode are outside the United States and Puerto Rico.
- Those serving in the military outside the U.S. and Puerto Rico also qualify for the extension to June 15.
Be sure to attach a statement indicating which of these two situations applies.
Interest, currently at the rate of four percent per year, compounded daily, still applies to any tax payment received after the original April 18 deadline.
Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts on:
- Form1040, Schedule B of their tax return, Part III of Schedule B requires U.S. citizens to report the country in which each account is located.
- Form 8938, Statement of Foreign Financial Assets and
- Report of Foreign Bank and Financial Accounts (FBAR), Form 114.
Automatic Extensions Available Taxpayers abroad who can’t meet the June 15 deadline can request an extension request which must be filed by June 15. Automatic extensions give people until Oct. 16, 2017, to file; however, this does not extend the time to pay tax.
- Anyone can request an extension on Form 4868.
- To get the extension, taxpayers must estimate their tax liability on this form and pay any amount due.
- Another option for taxpayers is to pay electronically and get an extension of time to file. IRS will automatically process an extension when taxpayers select Form 4868 and they are making a full or partial federal tax payment using Direct Pay, the Electronic Federal Tax Payment System (EFTPS) or a debit or credit card.
- There is no need to file a separate Form 4868 when making an electronic payment and indicating it is for an extension.
New Deadline for Reporting Foreign Accounts
Starting this year, the deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is now the same as for a federal income tax return.
This means that the 2016 FBAR, Form 114, was normally required to be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 18, 2017. But FinCEN is granting filers missing the original deadline an automatic extension until Oct. 16, 2017 to file the FBAR.
- Specific extension requests are not required.
- In the past, the FBAR deadline was June 30 and no extensions were available.
- In general, the FBAR filing requirement applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2016.
- Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them.
- The form is only available through the BSA E-filing Systemwebsite. Report in U.S. Dollars
- Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars.
- Likewise, any tax payments must be made in U.S. dollars.
Both Forms 114 and 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently.
- For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.
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