Get to know the authorThe Coronavirus, or COVID-19, outbreak is currently wreaking havoc around the world, with many countries introducing a total lockdown.
Governments around the world are also taking unprecedented measures to help mitigate the economic fallout.
As part of these measures, the US government has announced a 90 day tax filing extension this year, so tax day in 2020, for filing 2019 tax returns, is now July 15th. The extension just applies to federal returns, and it also applies to any federal income tax payments (including self-employment income tax) for the 2019 tax year.
The extension is applied automatically to all tax returns due on April 15th. Expats normally receive an automatic extension until June 15th, so they will benefit from an extra month this year. The extension applies to tax payments too, and while most expats don’t end up owing any US tax, those that do won’t face interest or late payment penalties so long as they pay before July 15th.
The IRS has also set up a page where they publish information about the measures they’re taking to help Americans affected by the outbreak at https://www.irs.gov/coronavirus.
Expats who require additional time beyond June 15th to file their US tax return can request a filing extension until October 15th by submitting IRS Form 4868, however any tax due must still be paid by October 15th.
US filing requirements for expats
“The Treasury has announced that the due date for filing federal income tax returns AND making federal income tax payments is automatically postponed to July 15, 2020. You do not have to file for an extension.” – Forbes
US expats are required to report their global income on Form 1040 every year, wherever in the world they reside.
To avoid double taxation, rather than rely on tax treaties expats have to claim either the US Foreign Tax Credit or the Foreign Earned Income Exclusion by filing the relevant form when they file.
Expats are also required to report their foreign registered financial (ie bank and investment) accounts and financial assets, based on minimum value thresholds per person.
Expats who own (or part own) a foreign registered business also have to report it.
Due to these additional requirements and the complexities inherent in dealing in multiple currencies and tax systems, most expats seek advice from an expat tax specialist to ensure that they file to their maximum benefit.
What else do expats need to know about the Coronavirus outbreak?
Expats should familiarize themselves with local government advice in their country of residence. Both international and local travel restrictions are in place in many countries, and non-essential contact with other people is also often either advised against or prohibited entirely. It’s also important to wash your hands regularly and thoroughly whenever you go out.
The US government is offering payments to people whose employment is affected by the outbreak, however again it’s not clear yet whether these will be available for expats.
Some countries, such as the UK, have similar measures in place which will be available for US expat residents.
While the situation is fluid, expats will still need to file, and we recommend that they seek advice from an expat tax specialist to ensure that they file in the most tax efficient and beneficial way possible given their circumstances.
Expats who are behind with their US tax filing from abroad can catch up without facing penalties under an IRS amnesty program called the Streamlined Procedure, as long as they do so before the IRS contacts them.
