Expat December Tax Extension – IRS Tax Return & FATCA Form 8938
If you are a US citizen or Legal Permanent Resident who is currently an Expatriate who resides overseas, and properly obtained an extension to file your U.S. tax return, then your tax return may still not be due yet.
As you watch people around you racing to get their taxes filed by October 17, you realize that they may not be aware of how the rules work and although taxes were due to be paid by 4/15, the returns themselves may not be due yet.
Dates for Tax Filing
Generally, tax returns must be filed by April 15th. If you live in the United States and apply for an extension than the due date to file your taxes is pushed forward six months. For tax year 2015, the taxes would not be due until October 17, 2016.
*That is because October 15 falls on a Saturday.
When you reside overseas, you receive an automatic two-month extension to file your tax returns. That means your taxes are not ordinarily do until June 15th. When a person resides overseas and obtains an extension, then their tax returns are not be due until December 15th
**That is because the initial date of April 15 is automatically pushed forward until June 15th (unless the due date falls on a weekend or holiday) and then pushed forward again six months in accordance with an extension.
Dates for Payment
Unlike receiving an extension for filing your taxes, the due date for payment of income taxes is always the same – April 15th.
***Additional estimated tax payments, employment tax withholding and other tax payments may be required along the way throughout the year.
Unlike Tax Returns, an FBAR (Report of Foreign Bank and Financial Account) has a different to date. The 2015 FBAR is due (or was due) by June 30, 2016. In future years, you may be able to obtain an extension in accordance with an extension to five tax return but for years prior – and including tax year 2015 – the FBAR was due already.
As such, if you failed to file an FBAR timely, he may be subject to significant fines and penalties. Depending on the facts and circumstances of your case, the penalties can range from a warning letter all the way up to 100% value of the foreign accounts.
Moreover, the IRS can also issue additional types of penalties and fines in accordance with other issue stemming from the failure to file a report your foreign accounts (Tax Fraud, Tax Evasion, Failure-to-File, Failure-to-Pay, etc.)
What are the Rules for Offshore Disclosure?
The IRS does not make it easy to understand the reporting requirements for individuals who have foreign accounts. As such, we provided a basic summary of common rules involving Taxes, FATCA, FBAR and related matters.
The summary has been reproduced for you below:
Golding & Golding is a flat-fee, full-service firm; we are lawyers who assist international clients in reporting their offshore accounts to the IRS. Most recently, many of our clients learned about Foreign Bank Account reporting requirements when they received a FATCA Letter from their Bank, asking them to certify their U.S. Status by submitting either a W-9 or W-8 BEN.
Who Has to Report?
We have represented numerous clients worldwide with issues similar to yours:
– Expats who relocated overseas and did not know they had to report their foreign accounts.
– U.S. Citizens who live overseas and may or may not earn significant income, but have accounts in a foreign country.
– Legal Permanent Residents of the United States who relocate back to a foreign country but are unaware that they are still required to report the foreign accounts.
– Non-Residents who meet the substantial presence test and therefore are required to report foreign bank and other accounts to the US government.
Please do not worry. We can assist you as we have assisted hundreds of clients in over 40 countries disclose upwards of $40 million in a single disclosure.
We are available seven days a week and provide flat-fee and full-service representation to our clients around the world.
These are the most basic rules when it comes to foreign accounts and foreign income:
If you are either a US Citizen, Legal Permanent Resident (aka Green Card holder or recently gave up your Green Card) or foreign resident who meets the substantial presence test, then you are required to report your worldwide income to the IRS. This means that even if you do not have any US-based income, you are still required to report your worldwide income (even if it is the type of income which is not taxed in your home country such as interest and dividend income in most Asian countries). And, if you have enough foreign income to meet the minimum threshold for having to file a US tax return, then you are required to do so even if it is based on your foreign income alone.
If you meet the requirement for being a U.S. “Taxpayer” (even if you do not meet the threshold for having to file a US tax return), you are still required to file an annual FBAR (Report of Foreign Bank and Financial Accounts). The threshold is as follows: if at any time during the year, you have more than $10,000 in foreign accounts (whether the money is in one account or spread over numerous accounts), you are required to file an FBAR.
In addition, if you have significant amounts of money overseas, then you may also have to file additional forms such as an 8938 (FATCA Form) or 8621 (Passive Foreign Investment Company, which includes Foreign Mutual Funds along with as many other passive investments). There are many other forms you may have to file, but we determine those on a case-by-case basis.
Fines & Penalties
Unless you are criminal, chances are the IRS or Department of Justice will not be banging down your door to come drag you to jail. With that said, the fines and penalties can be very steep and depending on your particular circumstances, may include penalties upwards of 100% of the value of your foreign account. If the IRS believes you were willful (aka intentional), then they may launch a criminal investigation against you and the penalties and fines can get much worse from here, including Liens, Levies, Seizures…and worse.
Customs Holds and Passport Revocation
With the implementation of FATCA (Foreign Account Tax Compliance Act), the United States is heavily cracking down on offshore tax evasion and unreported foreign accounts in general. The IRS and US government have the power to both revoke your passport as well as possibly hold you at the airport “customs hold” to question you on the spot (usually outside the presence of your attorney).
Getting Into Compliance
Getting into compliance should be mandatory on your “to-do” list. Even though our firm, Golding & Golding, is based in Newport Beach, we represent clients worldwide. A majority of our clients live overseas in over 40 countries. We have helped numerous clients get into compliance and are regarded as one of the top Offshore Disclosure Law Firms worldwide.
To that end, there are three main methods of compliance:
(1) Streamlined Compliance
This program is for individuals who were unaware of any requirement to file an FBAR and/or report their income on a US tax return. The penalties under the streamlined program are significantly reduced and may possibly be waived depending on whether a person qualifies under the strict definition of foreign resident for offshore disclosure purposes.
This program is mainly for individuals and businesses who were willful, aka were aware they were supposed to report their foreign accounts but intentionally hid or kept the account/income information secret.
(3) Reasonable Cause Statement
This is not a particular program; instead, it is a method for getting to compliance while attempting to avoid any penalty. There are many pros and cons to this method depending on your specific situation, which must be evaluated carefully with your attorney before making a decision.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver, and has also earned the prestigious Enrolled Agent credential. Mr. Golding is also a Board Certified Tax Law Specialist Attorney (A designation earned by Less than 1% of Attorneys nationwide.)