Tax Return Filing Extension for U.S. Taxpayers Living, Working Abroad by Tomoko Shoji, CPA/PFS, CFP
Posted on May 07, 2024
by
Tomoko Shoji
If you are a U.S. citizen or resident alien residing or working outside the U.S., you may be eligible for a two-month extension of time to file your federal tax return and pay the related tax liabilities without penalties. Included in this relief are expatriates and members of the U.S. military on active duty.
Under federal law, U.S. citizens and resident aliens must report and pay taxes on their worldwide income, including earnings from foreign trusts and foreign bank and investment accounts. Resident aliens include foreign persons who hold a green card, meet a substantial presence test or make a special first-year election. By contrast, non-U.S. tax residents, or nonresident aliens, are subject to U.S. tax only on income sourced from the U.S. or effectively connected with a U.S. trade or business.
Tax Filing Deadlines
The federal tax filing and payment deadline is traditionally April 15 or later if the 15th falls on a weekend. For the 2023 tax filing season, an exception exists for taxpayers living or operating a business in Israel, Gaza or the West Bank, who may postpone their tax filing and payment until Oct. 7, 2024.
U.S. citizens living or working abroad are allowed an additional two months to file their tax returns without requesting a filing extension from the IRS. However, taxpayers who wait for the extended June 15 deadline to pay their tax liabilities will accrue interest from the original April payment deadline.
If qualifying taxpayers are unable to file their tax returns by the extended June deadline, they must apply to the IRS for an additional four months to file in October. However, interest and penalties will accrue on any taxes unpaid by the regular due date.
Filing Requirements for Foreign Financial Accounts and Asset
Taxpayers with a financial interest in or signature authority over foreign bank accounts, securities or other financial accounts with an aggregate value exceeding $10,000 at any time during the tax year have an obligation to file Form 114, Report of Foreign Bank and Financial Accounts (FBAR), with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) by the April filing deadline. Taxpayers are granted an automatic extension to file by October 15, but a failure to file an FBAR may result in significant civil and criminal penalties.
U.S. citizens and resident aliens with an interest in foreign financial accounts and assets also may be required to file Form 8938, Statement of Specified Foreign Financial Assets, when the total value of all the foreign financial investment assets in which they have an interest is more than the reporting threshold based on their filing status. For example, a single taxpayer living abroad with specified foreign financial assets exceeding $50,000 on the last day of the year or more than $75,000 at any time during the tax year is required to report the aggregate value of those assets in U.S. dollars on Form 8938. The conversion to U.S. dollars requires the use of the exchange rate on December 31 of the tax year rather than the actual exchange rate on the date of the transaction. Foreign investment assets include financial accounts maintained by foreign financial institutions; stock, securities and financial instruments issued by non-U.S. persons; and interests in foreign entities, including foreign trusts and estates.
As a final note, taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the U.S. during 2023 must file with the IRS a dual-status alien tax return and attach Form 8854, Initial and Annual Expatriation Statement. by the due date of the tax return (including extensions).
About the Author: Tomoko Shoji, CPA/PFS, CFP, is a senior manager of International Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where she provides income and estate-tax planning and compliance service to high-net-worth families and closely held businesses in the U.S. and abroad. She can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email at info@bpbcpa.com.
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