Every taxpayer is already aware that U.S. citizens are required to file an annual income tax return with the Internal Revenue Service (IRS). What fewer people realize is that there are also income reporting and tax requirements for U.S. citizens living abroad. If you’re a U.S. citizen who lives in a foreign country – or if you’re planning on becoming one anytime soon – it’s important that you understand some basic information about your responsibilities and obligations as a taxpayer overseas. Our Sacramento CPA firm explains whether citizens living abroad are required to file U.S. taxes, with information about the 2018 tax filing deadlines for U.S. citizens residing outside the United States.
Are U.S. Citizens Living Abroad Required to File an Income Tax Return with the IRS?
Unlike most other nations, which typically tax individuals based on residency, the United States is unique in taxing all U.S. citizens – including those who reside overseas. It doesn’t matter if you live in Germany, France, Thailand, Canada, Sweden, South Korea, or anywhere else around the globe: if you are a U.S. citizen, you generally must report your global income to the IRS.
To quote an IRS press release issued June 12, 2017, with italics added for emphasis, “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.” Indeed, these benefits are available exclusively to citizens who have filed tax returns as directed by the IRS.
Failure to file a tax return or report foreign income when you are a U.S. citizen abroad can result in the imposition of substantial civil penalties, which could cost you many thousands of dollars. Depending on the circumstances, failing to submit an income tax return could even lead to criminal prosecution. In order to avoid costly fines – and potentially, months or years of prison time – it is critical that you comply with IRS reporting requirements for citizens overseas.
These requirements are not limited to just filing a timely tax return. In addition, you must also comply with other tax requirements that affect citizens abroad. For example, you must file an FBAR (Report of Foreign Bank and Financial Accounts, FinCEN Report 114) if both of the following statements are true:
- You are a U.S. person (including citizens, corporations, partnerships, trusts, and estates) with signature authority over, or financial interest in, one or more bank accounts or financial accounts located outside the U.S. – for example, a checking account you maintain at a foreign bank.
- The value of your account or accounts was higher than $10,000, for any duration of time, at any point during the year.
What is the 2018 U.S. Tax Filing Deadline Abroad?
Next year’s deadline to file taxes is Tuesday, April 17, 2018, with various extensions available, the latest being October 15, 2018. If you will be residing overseas on April 17, 2018, or if you will be on military duty, you will receive an automatic two-month extension on the deadline.
However, it is critical to keep in mind that the extension applies only to filing taxes – not to paying taxes. Even if you obtain an extension on the filing deadline, you will still be required to pay interest on unpaid taxes by the tax return’s normal due date.
Roseville CPAs Providing Tax Preparation Services for Expats
The U.S. Tax Code is notorious for its complexity, and IRS regulations are very difficult for most taxpayers to navigate with ease and confidence. For U.S. citizens abroad, to whom special financial regulations apply, making it through the upcoming tax season may be even more of a challenge.
Don’t miss out on tax deductions, tax credits, or other opportunities to utilize the U.S. Tax Code strategically – or worse, find yourself at the center of a criminal investigation. Instead, get an early start on preparing for next year’s tax season, and hire a trusted, experienced California CPA to handle all of your tax preparation needs for you.
At Cook CPA Group, our knowledgeable team of tax consultants and Certified Public Accountants approaches every matter with over 20 years of experience, giving you total peace of mind that your tax return will be prepared correctly and efficiently. We can review your records for errors, look for ways to minimize your tax liability, represent you before the IRS, help you comply with the Foreign Account Tax Compliance Act (FATCA), and assist with other tax-related issues commonly affecting expats and citizens abroad.
Filing your taxes doesn’t have to be stressful. To learn more about how a CPA, tax consultant, or professional tax preparer in Roseville can assist you with Roseville tax services for individuals, contact Cook CPA Group at (916) 724-1665 for a free tax consultation. From our offices in California, we serve clients in Australia, Brazil, China, Colombia, Israel, Italy, Japan, Luxembourg, Mexico, the Netherlands, Singapore, Spain, the United Kingdom, and dozens of other nations around the world.