By Orlando Gotay
I write this note just after the “regular” US federal income tax return filing deadline of April 18, 2016, specifically for expats who did not file by then. In case you wondered, this year’s “regular” filing deadline was delayed by three days due to DC’s Emancipation Day holiday.
Those who reside outside the United States and Puerto Rico as of the filing deadline qualify for an automatic two-month extension to file a return and to pay the tax due. Either spouse filing a joint return qualifies for the extension. This extension runs through June 30. If you file your return and pay whatever you owe within that time, you will not be subject to the penalties for failure to file or to pay. However, the IRS will calculate interest due on the tax from April 18 onward and send you a bill.
IRS rules say that the taxpayer must “attach a statement” to the return, saying that the taxpayer qualifies for the automatic extension. I recommend writing in red letters at the top the return: “taxpayer resides outside the US—automatic extension” or words to that effect.
Taxpayers are normally entitled to a six-month extension to file (but not to pay). Expats can get that extension too, by filing Form 4868 within the automatic extension window, on or before June 30, but it runs concurrently with the automatic extension, so an expat who applies gets an extension to October 15.
If a taxpayer needs additional time, there is yet another two-month extension available by writing a letter to the Austin, TX, IRS Service Center. If you write, “I need the additional time to prepare a complete accurate return,” your request will likely be granted.
Lastly, there is a special extension of time to meet residence abroad tests in order to qualify for exclusion of Foreign Earned Income. Form 2350 is used for this purpose and may provide you 30 days past the date when you expect to qualify for the residence abroad tests.
As alluring as extensions are, I recommend their use only when necessary. “Blowing through” an extension can be expensive, but most importantly, keep in mind that the IRS clock to audit your return will not begin until you file.
Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the US Tax Court and other taxing agencies. His love of things Mexican has led him to devote part of his practice to the tax matters of US expats in Mexico. He can be reached at firstname.lastname@example.org.