Let’s face it, very few people actually enjoy filing their taxes. It’s no wonder why over a third of Americans report that they procrastinate and always file their taxes at the last minute.
However, the tax timeline is a bit different for American expats (and green card holders). In this article, we quickly cover the tax obligations that each American living overseas must comply with, the deadlines to keep in mind, and why they should file their US tax returns before procrastination creeps in.
Why must US expats file a tax return?
Now, if this is your first time hearing about the deadline, you may ask yourself: “I might be an American citizen, but I live overseas, thousands of miles away from the US. Why do I still need to file a US tax return?”
The quick answer: the United States applies citizenship-based taxation. All US expats, regardless of whether they live in the Haussmannian streets of Paris or the beaches of Punta Cana, must declare their worldwide income to the IRS each year.
So if you’ve yet to file a US tax return this year, best to get started. It’s also important to file on time if you want to take advantage of the IRS’ tax relief programs, such as the Foreign Tax Credit (FTC) or Foreign Earned Income Exclusion (FEIE).
What if you have already been living overseas for quite some time but never filed a US tax return? If your US tax filing requirement while overseas is news to you, the IRS has an amnesty program called the Streamlined Procedure to help US expats catch up on their taxes (in a penalty-free way!).
Deadlines explained (quickly!)
Some good news: expats have an automatic extension until June 15th to file a tax return to the IRS and declare their worldwide income. It’s common to file an extension to push back that date even further (to October 15th).
One caveat: While the filing deadline can be extended to October 15th, any tax owed is still due by June 15th for those abroad, so it’s important to pay the IRS when requesting your extension, even if you have to estimate the amount you’ll owe.
How & when to request an extension for October 15th
To request an extension for October 15th, you must file Tax Form 4868 to the IRS. Form 4868 can be submitted electronically or in the mail, with a timestamp or postmark by June 15th.
The form is completed with your personal details, such as name, address, tax ID (social security number), as well as an estimate of your tax liability.
Three reasons to file now (and get your taxes over with)
As the saying goes: “The early bird gets the worm”. Here’s why it pays to get your US taxes knocked out sooner, rather than later!
Reason #1: Obtain financial clarity early
Are you planning to make a big financial decision, such as purchasing a home or applying for financial aid? If so, you’ll need a tax return to prove your household income. When you file your tax return early, you can quickly access this financial information to get started on your goals.
Reason #2: Receive your tax refund faster
If the government has money for you, why wait so long to collect it? The refund process is even faster if you file your tax return electronically. According to the IRS, the average refund turnaround time for electronically filed returns is about 2-3 weeks.
Reason #3: Avoid making last-minute tax mistakes
It’s true, filing taxes might not be the most fun thing to do. But if you take too long to file your taxes, not only might you experience some stress, but you may miss out on some key tax savings opportunities by rushing through the process.
It feels good to check taxes off your to-do list! It’s why the best time to file your tax return is now so that you can prepare yourself accordingly. Or, if you’re enlisting the help of experts, your CPA will have plenty of time to assess your tax situation and ensure the best possible outcome for you.
Let Bright!Tax help you cross the finish line (early!)
Leaving the US to live abroad and explore the world is an enriching opportunity of a lifetime. But when you’re overseas, you can get caught up in so many things at once, that sometimes filing your US tax return falls off your priority list.
With so many things on your plate, let Bright!Tax help you file & stay compliant! Our team of experts will (kindly!) keep you updated on the most important deadlines each tax season, so you can focus on your adventure abroad.