When you are living abroad, you have a lot to think about, whether you have moved to another country for business purposes or pleasure. Your taxes are likely furthest from your mind. Even though you are not currently living in the United States, you are still a US citizen, and as such, you still have an obligation to file your yearly income tax returns, as well as your FBAR (Report of Foreign Bank and Financial Accounts Report) forms. If you forgot to file your taxes or FBAR forms, you may be worried about penalties, fees, and other problems. However, there are a couple of programs available to help you, so you can take care of your legal requirements and focus on other, more important matters.
Required Tax Documents for Americans Living Abroad to Take Advantage of Special IRS Tax Programs for Expats
- FBAR FinCEN Form 114 for the most recent six tax years
- Delinquent or amended tax returns for the expat
- Any necessary information returns for the previous three tax years
- Any corresponding certifications
- Form 14653, Certification by US Person Residing Outside US
Penalties and Fees for Missing Filing Deadlines
When you live abroad, whether you are a member of the United States military or not, you have a grace period after the April 15 filing deadline. This grace period of two months allows you to file your taxes later than those living in the US, with no penalties or interest assessed. If you can't get your taxes submitted before this two-month grace period expires, you can request an extension through October, as long as you apply for the extension before the original automatic two-month grace period expires. If you do not request the six-month extension, or you do not get your tax return submitted before your extension expires, you will typically be charged penalties and interest. However, the IRS provides a Streamlined Filing Procedures and Catch Up Options programs that greatly reduce and nearly eliminate fees for those who forget to file their overseas tax returns. However, the failure to file must be due to non-willful misconduct, as certified by the tax payer. If the taxpayer is currently subject to an audit procedure, the taxpayer is not eligible for this program.
Requirements for Streamlined Filing Procedures and Options for Catching Up
To qualify for this program, expats must not have had a home within the United States for the last three tax years. The expat must also not have filed a tax return in the United States over the same three-year time period. Finally, the individual must have been a resident of a location not within the United States for at least 330 days. The expat must self-certify that they failed to file taxes and report income to the IRS, and subsequently failed to pay taxes as required by the laws of the United States. If the request is granted, eligible expat taxpayers will be exempt from paying penalties due to failure to file tax returns and failure to pay taxes owed. The taxpayer will also be exempt from paying FBAR penalties. The taxpayer must also remit all taxes and interest amounts due at the time of filing.
Importance of Handling Tax Issues Even When Living Abroad
By sticking your head in the sand and ignoring your tax filing and payment requirements while living abroad, you can run into quite a bit of hassle, which can affect your freedom and your bank accounts. You will be assessed with penalties, fees, and interest. You can also face jail time if and when you return to the United States. And, you will likely be placed on a list that will cause your taxes to be audited more frequently. Even though you live outside the United States, you should file your taxes and FBAR forms each year like those citizens who live within the confines of the United States. If you have not done so already, you should submit your catch-up filings immediately, along with any taxes and interest owed. Paying taxes is never enjoyable, but it is necessary and required by law.
Final Notes
If you have questions about your taxes or need help filing your tax returns and FBAR forms, it is important to seek the advice and assistance of a qualified, licensed United States tax expert in your area, such as Zara Rhone CPA Inc. This will help you ensure that you file the appropriate forms, pay the proper amount of taxes, and avoid trouble with the IRS. Then you can enjoy your time living abroad without the worry of financial or legal encumbrances waiting for you if and when you return to the United States.
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