United States

IRS alerts taxpayers living and working abroad of impending deadlines

TAX ALERT  | 

On June 12, the IRS announced in news release IR-2017-105, a reminder to taxpayers living and working abroad that their 2016 federal income tax returns are due by June 15. The IRS also highlighted other areas of foreign reporting, including this year’s new deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR).

U.S. citizens and resident aliens living abroad and active duty military serving overseas on the original due date of their U.S. income tax return are generally eligible for an automatic two-month extension. Taxpayers needing additional time can file for an additional extension on or before June 15 to extend the due date of their return to Oct. 16. This, as the IRS cautions in its release, is an extension of time to file and does not extend the time to pay. Taxpayers seeking an extension must nonetheless pay tax by the regular due date. However, the extension to file is automatically granted upon filing a request.

The release also notes that certain taxpayers, including those living domestically with certain international connections, may be required to fill out and attach Form 8938, Statement of Foreign Financial Assets, to their tax returns. Taxpayers with certain specified foreign financial assets are generally required to file Form 8938 and attach it to their tax returns if the aggregate value of the specified assets are in excess of a certain threshold.

According to the release, taxpayers living and working abroad may also use the IRS Free File system to prepare and electronically file their tax returns at no cost. Those taxpayers with an adjusted gross income (AGI) of $64,000 or less can prepare their tax returns using certain brand name software, capable of accommodating foreign addresses, then electronically file their returns for free. Taxpayers with AGI in excess of $64,000 may use Free File Fillable Forms, electronic versions of IRS paper forms, to prepare and electronically file their tax returns at no cost to the taxpayer. These options are both available until Oct.16 for those taxpayers filing a 2016 return.

In addition, the release goes on to remind taxpayers that they may also be required to separately file an annual FBAR. Generally, FBAR filing requirements apply to anyone with an interest or signature authority over a foreign financial account with an aggregate value in excess of $10,000 at any point during the year. New to 2016, the FBAR (Form 115) is required to be filed with the Financial Crimes Enforcement Network (FinCen) on or before the original due date of a taxpayer’s individual income tax return. However, as the release notes, FinCen is granting taxpayers failing to meet the original deadline an automatic extension of six months, moving the due date of the 2016 FBAR to Oct. 16, 2017. Taxpayers do not need to file a request to obtain this extension.

Takeaways

Taxpayers living and working abroad, and those living domestically with certain foreign connections, should pay careful attention to this release so as not to miss the deadline to file or extend and remit potential tax payments for U.S. tax obligations. Taxpayers with questions regarding the applicability of certain forms, such as the FBAR and Form 8938, should consult their tax advisors to make sure all required forms are correctly filed.

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