Get to know the author
Tax season is approaching, and your return isn’t quite ready?
No need to panic — this happens to many Americans living abroad. Many are not even aware they’re still subject to US taxes even though they live in another country.
Luckily, the IRS provides expats an extra opportunity to collect all the necessary documentation and file tax returns on time. Filing an extension can give you valuable extra time to sort things out or reach out to a tax preparer if your tax situation is too complex for DIY.
But there’s a twist for US citizens abroad. There are two forms that often cause confusion about which you should file. This article explores Form 2350 and Form 4868 to help you understand which applies to you and how to file your tax extension smoothly.
What is Form 2350?
Form 2350 is an application for US citizens and resident aliens living abroad who need more time to file their tax returns. You use it to request an extension when you expect to qualify for the Foreign Earned Income Exclusion (FEIE).
You must file Form 2350 before the normal filing deadline, and the requested extension is discretionary. This means that the IRS can approve or deny the request. If granted, the extended filing date is normally up to 30 days after the date you expect to be able to meet the requirements to claim the Foreign Earned Income Exclusion.
If an extension is granted but due to unforeseen circumstances, you can’t ultimately claim the Foreign Earned Income Exclusion, you should file as soon as possible.
Note:
If you need extra time to meet either of these tests and claim the exclusion on Form 2555, then Form 2350 is the form you need to file.
Form 2350 is a one-page form. It requests the filer’s name, social security number, and foreign address.
Other information on the form includes the date that an extension is requested until, the dates that the filer moved abroad and expects to return to the US, and the qualifying dates for claiming the Foreign Earned Income Exclusion.
Zooming out: Foreign Earned Income Exclusion — definition & eligibility
US law requires all American citizens and Green Card holders to file US taxes and report their worldwide income, including those living abroad. This leaves many Americans living abroad at risk of double taxation (having to pay both US and foreign income tax in the country where they live) on their income.
As many countries’ income tax rates are higher than US rates, claiming the Foreign Earned Income Exclusion can significantly reduce or even eliminate your US tax bill, helping you avoid double taxation. It’s a useful provision for expats whose only income is earned, who earn less than the threshold, and who don’t pay foreign income taxes (or who pay foreign income taxes at a lower rate than the US rate).
Claiming the Foreign Earned Income Exclusion on IRS Form 2555 lets expats exclude up to $120,000 per taxpayer for the tax year 2023. In tax year 2024, that figure increases to $126,500.
There are two ways to qualify for the FEIE:
- Physical Presence Test: Requires living outside the US for 330 days out of a 365-day period.
- Bona Fide Residence Test: This test shows you’re a resident of a foreign country based on intent and circumstances, and a minimum of one calendar year abroad.
Note:
Some expats who moved abroad midway through a year will want to claim the Foreign Earned Income Exclusion for the 365 day period after they moved abroad. This may mean that they are unable to file their US tax return until after the normal tax filing deadline. Filing IRS Form 2350 allows them to do this.
What is Form 4868?
Form 4868 is the more common — or general — tax extension form used by US citizens and residents living both in the United States and outside of the country. It grants an automatic six-month extension to file your federal income tax return.
This means the deadline to submit your return moves from the typical April 15th to October 15th (or the next business day if October 15th falls on a weekend). It applies to both your main tax form (like Form 1040) and any associated tax schedules.
This form is for most US taxpayers, including individuals, sole proprietors, and some trusts and estates. If you’re a US citizen or resident living stateside and need more time to gather your tax documents, complete your return, or consult a tax professional, Form 4868 is the way to go.
Note:
Filing Form 4868 only extends the deadline to file, not the deadline to pay any taxes you owe. Those are still due by the original April 15th deadline, or June 15th if you qualify for the automatic extension for taxpayers abroad (though interest always accumulates beginning April 15th).
To avoid penalties and interest, it’s important to estimate your tax liability and make a timely payment by the original deadline, even if you haven’t filed your return yet. The best way to pay the IRS is through their online system, where you’ll get immediate confirmation that they have processed your payment.
While Form 4868 extends your federal tax return deadline, it doesn’t directly affect the filing deadline for the Report of Foreign Bank and Financial Accounts (FBAR). The good news is that if you don’t file by April 15th, the FBAR deadline is automatically extended to October 15th as well, so you don’t need to file a separate extension for it.
Pro tip:
State tax deadlines may differ from federal deadlines. Some states, like California, may automatically grant an extension if you have a federal extension. However, others, like New York, require you to file an extension directly on their website. It's always best to check with your state's Department of Revenue for specific filing requirements.
Additional extension: The December 15th deadline
While Form 4868 grants an automatic extension to October 15th, US citizens living overseas can explore an additional two-month grace period to file their tax returns. This would push the deadline all the way to December 15th.
But, it’s important to note that this discretionary extension isn’t guaranteed and requires a specific process:
- File Form 4868 first: The initial step is to secure the standard October 15th extension by filing Form 4868.
- Submit a written explanation: Before the October 15th deadline, mail a letter to the IRS detailing why you need an additional two months.
Examples of acceptable reasons include waiting for investment documents or your host country’s tax assessment not being finalized by October 15th.
You should send your explanation letter to:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0045
United States
Remember:
This extension is discretionary, meaning the IRS doesn't have an obligation to grant it simply because you request it. A well-reasoned explanation in your letter is crucial. The IRS will generally only reach out if your request is denied.
If you previously filed Form 2350, you cannot apply for this extension. Additionally, it doesn’t impact the deadline for filing the FBAR (Report of Foreign Bank and Financial Accounts).
What if you missed the deadline?
Not filing your return or having your extension denied means facing potential penalties and interest charges on any taxes owed. The best course of action is to request an extension well before the deadline to avoid these consequences.
However, even if you miss the deadline, there are still options:
- First-Time Penalty Abatement (FTA): This IRS program offers a waiver for some penalties, including failure-to-file, failure-to-pay, and failure-to-deposit. The key is having a clean compliance history – the IRS is more forgiving of a one-time mistake.
- Streamlined Filing Compliance Procedures: This program acts as a tax amnesty program specifically designed for some US citizens abroad who haven’t filed their returns. Enrolling allows you to catch up on your tax obligations without the usual penalties.
Seek advice from expat tax professionals
Filing US taxes from abroad is more complex than filing in the US. There are plenty of considerations to take into account:
- whether it’s more beneficial to claim the Foreign Earned Income Exclusion or another tax credit
- how to qualify
- where your income is sourced
- if you have earned or unearned income
- where you should pay income taxes first, and much more.
But you don’t have to deal with this alone.
Expats almost always benefit from tax specialist advice, especially those behind with their US tax filing and who may qualify for an IRS amnesty program for expats.
