Many U.S. expats face challenges with late tax filings, leading to penalties, interest, and other complications. However, specific provisions exist for expats that can help mitigate these issues. This summary offers key insights into late tax filing, penalties, and the options available to expatriates.
US Expat Filing Deadlines and Extensions
For most Americans, the tax filing deadline is April 15th. U.S. expats automatically receive a two-month extension, making their deadline June 15th. If you owe taxes, payments are still due by April 15th to avoid penalties and interest. Expats expecting a refund won’t face penalties for filing after June 15th.
If additional time is needed, expats can request an extension until mid-October by filing IRS Form 4868. It’s important to note that any outstanding taxes must be paid by April 15th to avoid accruing interest.
Late Tax Filing Penalties
The IRS imposes two main penalties for late filings:
- Failure to File Penalty: 5% of unpaid taxes per month, up to a maximum of 25%.
- Failure to Pay Penalty: 0.5% interest per month on unpaid taxes, also up to 25%.
Paying at least 90% of your taxes by April 15th is critical, even if you’re filing under an extension. While many expats don’t owe taxes due to foreign tax credits and exclusions, it’s still prudent to file on time or request an extension.
Other penalties may apply for inaccuracies or underpayment of estimated taxes.
Risk of Missing Out on Tax Breaks
Filing late can jeopardize eligibility for valuable tax breaks, such as the Foreign Earned Income Exclusion (FEIE), which allows exclusion of over $100,000 of foreign-earned income. The IRS may revoke this benefit if taxes aren’t filed on time, and once revoked, it can’t be claimed for five years.
Catching Up on Late Taxes
Expats who have failed to file due to non-willful negligence may qualify for the IRS Streamlined Filing Procedure, allowing them to catch up on the last three years of tax returns and six years of FBARs (Foreign Bank Account Reports). This process can be complex, so seeking professional guidance is recommended.
