Extension Possibilities:

Before we go into late tax filing, it’s vital to understand that as an expat, you have alternatives for extending your deadline.

As a taxpayer whose primary residence and place of employment are both outside the United States, the IRS automatically provides you a two-month extension until mid-June, which you don’t have to seek. It’s vital to keep in mind, though, that you’ll need to attach Along with your June tax return, include a statement explaining why you qualified for the automatic extension.

Filling out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return will give you until mid-October to file your return if you need more time than that.

The Consequences of Late Tax Filing

You may face penalties and lose benefits relating to your overseas income and assets if you file your taxes late for whatever reason.

You’ll owe more interest the longer you wait.

Extensions allow you more time to file your return, but not more time to pay your taxes. Interest begins to accrue once the April deadline has passed.

Individual taxpayers pay an interest rate equal to the federal short-term rate 0

which changes over time plus 3%. Every three months, the IRS announces the new federal short-term rate in their Newsroom.

The is a possibility you’ll have to pay IRS penalties.

The IRS imposes two penalties for late tax payments:

  • Penalty for Failure to File:

If you file your definitive return after the deadline, you will be charged a Failure to File penalty. This penalty is normally 5% of outstanding taxes for each month you miss your filing date, up to a maximum of 25% of your unpaid taxes owed.

  • 2. Penalty for Failure to Pay:

All taxes owing that are not paid by the filing deadline are subject to the Failure to Pay penalty. This is penalty is an interest charge of 0.5 percent each month is usually applied based on the total amount of overdue taxes. This penalty might be applied until it reaches a total of 25% of your overdue taxes.

Even if you plan on filing taxes late via the automatic two-month extension, at least 90% of your projected taxes owed must be paid before the mid-April filing date. Even if you file your return on time, you may be subject to a Failure to Pay penalty.

We frequently discover that expats owe no taxes because of the foreign tax credit and foreign earned income exclusion. However, just in case, it’s a good idea to file in April or get an extension until October to avoid paying penalties.

There’s a Chance You’ll Miss Out on a Big Tax Breaks.

The loss of expat tax rights may be a bigger issue if you file late.

There is no certainty that expats who file late taxes will be eligible for the Foreign Earned Income Exclusion, which allows you to deduct over $100,000 of foreign-earned income from your tax payment.

To claim this exclusion, you must submit Form 2555 with your tax return as soon as possible. The IRS has the right to remove your eligibility to use the FEIE if you don’t file on time. You won’t be able to claim it again for at least five years after it’s been revoked.

The FEIE can save you thousands of dollars in taxable income each year, so it’s a benefit you should take advantage of!

What to Do If You’re Running Late

Of course, the most effective way to Get compliant and file your tax taxes on time each year is the best way to prevent all these potential fines. However, if you do get behind on your taxes and file them late, you still have choices!

The IRS has programmed in place to help expats get caught up on their taxes, especially if they were unaware that they were required to file. If you are only one year late, you should file as soon as possible.

If you were unaware that you needed to file and are several years late, the Streamlined Filing Procedures may be a good fit for you. It’s preferable to get caught up with the IRS late than never, and it’s best if you consult a qualified professional to help you figure out how to proceed to go about it.

Share via
Send this to a friend