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IRS reminds taxpayers living and working abroad of pending filing deadlines

June 12, 2018

In a news release, IRS has advised taxpayers living and working out of the country that they must file their 2017 federal income tax return by Friday, June 15 or request a filing extension by that date. IRS noted that the deadline this year for reporting foreign accounts is also fast approaching.

Income tax return filing requirements, including deadlines. U.S. citizens and resident aliens living abroad, or serving in the military outside the U.S. on the regular due date of their tax return (but see below for combat zone taxpayers), generally have an automatic 2-month extension beyond the regular Apr. 15 deadline to file their returns, i.e., to June 15. To use this automatic 2-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies.

U.S. citizens and resident aliens are legally required to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B, Interest and Ordinary Dividends, to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the U.S. during 2017 must file a dual-status alien return, attaching Form 8854, Initial and Annual Expatriation Statement. A separate copy of the Form 8854 must also be filed with IRS by the due date of the tax return, including extensions.

Taxpayers abroad who can’t meet the June 15 filing deadline can obtain an automatic extension, until Oct. 15, 2018, if they file an extension request by June 15. IRS cautioned, however, that a filing extension does not extend the time to pay tax. IRS encouraged taxpayers who need extra time to file to visit the Free File link on IRS.gov and electronically 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 noted that it 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.

Members of the military and eligible support personnel serving in a combat zone have at least 180 days after they leave the combat zone to file their tax returns and pay any taxes due. This includes those serving in Iraq, Afghanistan and other combat zone localities.

Foreign account reporting. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens, and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds.

Separately, taxpayers with foreign accounts, the aggregate value of which exceeded $10,000 at any time during 2017, must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (i.e., FBAR).

The FBAR filing deadline is now the same as for a federal income tax return. Thus, the 2017 FBAR, Form 114, was normally required to be filed electronically with FinCEN by Apr. 18, 2018. However, FinCEN is granting filers missing the original deadline an automatic extension until Oct. 15, 2018 to file the FBAR.

Report in U.S. dollars. Any income received or deductible expenses paid in foreign currency must be reported on a U.S. return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars. Both Form 114 and Form 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. IRS generally accepts any posted exchange rate that is used consistently.

Free file and e-file available. IRS encouraged taxpayers abroad to use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $66,000 or less can use brand-name software to prepare their returns and then e-file them for free. A limited number of companies provide software that can accommodate foreign addresses.

A second option, Free File Fillable Forms, the electronic version of IRS paper forms, has no income limit and is best suited to people who are comfortable preparing their own tax return.

Both Free File and other e-file options are available until Oct. 15, 2018, for anyone filing a 2017 return. Taxpayers can check out the e-file link on IRS’s website for details on the various electronic filing options.

References: For reporting requirement for individuals with foreign assets, see FTC 2d/FIN ¶S-3650United States Tax Reporter ¶60,114.06.

IR 2018-135, 6/8/2018

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