The Internal Revenue Service is reminding taxpayers living and working abroad that they must file their 2016 federal income tax return by Thursday, June 15.
The special June 15 deadline is available to both U.S. citizens and resident aliens abroad, including those with dual citizenship. For those who can’t meet the June 15 deadline, tax-filing extensions are available and they can even be requested electronically. In addition, a new filing deadline now applies to anyone with a foreign bank or financial account required to file an annual report for these accounts, often referred to as an FBAR.
Here is a rundown of key points to keep in mind:
Most People Abroad Need to File:
An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income exclusion or the Foreign Tax credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return. A taxpayer qualifies for the special June 15 filing deadline if both their tax home and abode are outside the United States and Puerto Rico. Those serving in the military outside the U.S. and Puerto Rico also qualify for the extension to June 15.
Special Income Tax Return Reporting for Foreign Accounts and Assets:
Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.
Automatic Extensions Available:
Taxpayers abroad who cannot meet the June 15 deadline can still get more time to file, but they need to ask for it. Their extension request must be filed by June 15.
Automatic extensions give people until October 16, 2017, to file; however, this does not extend the time to pay tax.
Combat Zone Taxpayers get More Time Without Having to Ask for it:
Members of the military and eligible support personnel serving in a combat zone have at least 180 days after they leave the combat zone to file their tax returns and pay any taxes due. This includes those serving in Iraq, Afghanistan and other combat zone localities. A complete list of designated combat zone localities can be found in Publication 3, Armed Forces’ Tax Guide, available on IRS.gov.
Various circumstances affect the exact length of the extension available to any given taxpayer. Details, including examples illustrating how these extensions are calculated, can be found in the Extensions of Deadlines section in Publication 3.
New Deadline for Reporting Foreign Accounts
Starting this year, the deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is now the same as for a federal income tax return. This means that the 2016 FBAR, Form 114, was normally required to be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 18, 2017. But FinCEN is granting filers missing the original deadline an automatic extension until Oct. 16, 2017 to file the FBAR. Specific extension requests are not required. In the past, the FBAR deadline was June 30 and no extensions were available.
In general, the FBAR filing requirement applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2016. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-filing System website.
Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States during 2016 must file a dual-status alien return, attaching Form 8854, Initial and Annual Expatriation Statement. A copy of the Form 8854 must also be filed with Internal Revenue Service Philadelphia, PA 19255-0049, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.