By Bethany Bouw
The due date for extended individual income tax returns (October 16, 2017) is rapidly approaching. For individuals who live abroad, there may be questions about when to file and when to extend, especially if you are struggling to gather your tax information across multiple countries/continents. Fortunately, the IRS understands that residing abroad may pose problems with gathering the pertinent information. They have provided a variety of extensions to meet the needs of the affected filers.
Automatic Two Month Extension
You may be eligible for an automatic 2-month extension if you qualify as either of the following:
- You are a US citizen or resident alien taxpayer and your main place of business and residency is outside the US and Puerto Rico.
- You are in military or naval service on duty outside the US and Puerto Rico on the regular due date of the return.
Assuming a calendar year, this would extend your return from April 15th (considering weekends and legal holidays – i.e. Emancipation Day) to June 15th.
It is important to note that this is an extension to file the return. There are no late payment penalties if you pay by the 2-month extended due date. However, you may face interest on the taxes paid at that time. If you anticipate owing taxes with your filing, you should pay at the regular due date of the return to minimize/eliminate your interest owed on payment. This is done by attaching a statement to your return to explain your qualifications for the extension.
Additional Four Month Extension
Should you require additional time beyond the automatic 2-month extension, you may request an additional 4-month extension to file the return. Assuming a calendar year, this would further extend your return from June 15th to October 15th (again considering weekends and legal holidays).
This is an extension to file the return. This is not an extension to pay the return amount due. If the taxes are not paid by June 15, penalties for late filing will be assessed from June 15th forward. Interest on the tax and penalties will be assessed from April 15th forward. This extension request is done on Form 4868 and must be made by June 15th. It is important to note that the Form 4868 must have certain boxes checked. Ryan & Wetmore is able to assist in filing Form 4868 with the proper form completion.
Additional Discretionary Two Month Extension
Taxpayers who meet the definition of “out of the country” from the IRS Form 4868 instructions can request an additional discretionary 2-month extension. Assuming a calendar year, this would extend your return from October 15th to December 15th (again considering weekends and legal holidays).
This is an extension to file the return. This is not an extension to pay the return amount due. This is requested via a letter with reasons requiring the additional two months. There is no notification of receipt provided unless the request is denied or the taxpayer has “applied for” as their ITIN. This extension is not available for those who applied for an extension on Form 2350. It is important to note that this extension request is not particularly simple and may be rejected if not requested properly.
Form 2350 – Extension to Qualify for Foreign Earned Income (FEI) Exclusion
This is an extension for those who require the following:
- Additional time to file in expectation of filing Form 2555 (2555EZ)
- Additional time to meet either the bona fide residence or physical presence test to qualify for the FEI exclusion and/or foreign housing exclusion/deduction
If an individual already meets the physical presence test by the original or standard 6-month extension filing due date, they do not require this extension request. This filing extends the due date to 30 days after the date in which the taxpayer expects to meet the tests.
This is not an extension to pay the return amount due. Penalties and interest may be assessed if paid after the regular due date of the return. This requires approval by the IRS.
Ryan & Wetmore has experience assisting clients with their extensions related to foreign residence over the years. We would be happy to assist you with any concerns about extending your return.
The International Tax Team at Ryan & Wetmore is well-versed in foreign informational filings. For questions or concerns regarding your international accounts and assets, click here to email our foreign tax team. Please be aware that tax issues are complicated and may vary based on the details of your situation. For this reason, an initial phone call is generally required to obtain the facts and address the questions.
Bethany Bouw CPA, is a manager at Ryan & Wetmore and has been with the firm for over eight years. She has experience with offshore voluntary compliance and assisting taxpayers with foreign asset and entity reporting requirements.
Traci Getz CPA, is a partner with Ryan & Wetmore, P.C. Traci has over fifteen years of experience providing accounting, tax, and consulting services to small and medium-sized business owners. She works with clients to understand their accounting and tax issues while specializing in international tax, healthcare, and construction.
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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