Due to the ongoing COVID-19 pandemic, the US government extended the US tax payment deadline for expats from April 15 to May 17. That means April 15 – the day that immediately gives US taxpayers a headache – got extended. But luckily, American expats don’t have to stress over this date in 2021, since most don’t owe US taxes.
Now that you have an extra month to get your affairs in order, read on to make sure you know all the ins and outs of paying your US expat taxes.
Who Owes US Taxes?
You might think that, if you were born in the United States and choose to move to another country, you are done having to pay taxes to the US. Unfortunately, you’d be wrong. US citizens, even those living and working abroad, still might have to pay their taxes to the IRS.
The good news is that most expats don’t owe US taxes. This is because of certain avenues the IRS provides that helps US citizens overseas avoid double taxation. For example, depending on which adopted country you’re living in, you could take advantage of certain Tax Treaty benefits.
If you’re earning money from a US-based company and traveling to the US often for work, you’re likely already paying your taxes with the money that’s taken out of your paycheck by your employer. You can also decrease the amount you owe with some specific tax benefits (more on that in a moment). But if you haven’t paid in enough through your employer (this might happen if you claim allowances on your paycheck), then you may owe taxes to the IRS.
However, if you’re living in a different country and earning money there, you’ll need to file your taxes in the US by reporting your worldwide income.
Double Taxation Prevention
US citizens abroad could run into the situation of being taxed twice. Essentially, you could be taxed by the country where you’re living and by the United States on the exact same income. To avoid this situation, there are a few key tax breaks you can take advantage of.
One of the biggest benefits you can claim is the Foreign Earned Income Exclusion or FEIE. With this benefit, you can exclude up to $107,600 of foreign-sourced income from your US taxable income. For any earnings that aren’t included within the FEIE, you might be able to cover those earnings through the Foreign Tax Credit, or FTC. Some countries even have specific tax treaties with the US, but the exact details of these credits will depend on where you live.
2021 US Tax Payment Deadline
As we mentioned, the deadline to pay your US expat taxes as an American living abroad for the 2020 tax year has been extended. The new US tax payment deadline for an American expat in 2021 is May 17, 2021. However, the majority of US expats find that they actually don’t owe any taxes.
If that’s the case for you, US expats who don’t owe any taxes have until June 15, 2021 to file. This extension automatically applies to you. Meaning you don’t have to reach out to the IRS to let them know you won’t be filing until the summer.
Just keep in mind that this deadline only applies to those who don’t owe US expat taxes. If you do have to pay, you need to do so by the US tax payment deadline for expats – May 17, 2021.
How to Pay US Taxes on MyExpatTaxes
So, if you’ve discovered that you actually do owe US expat taxes, how do you go about paying them? The tax payment process can be incredibly complicated for US citizens living abroad. Plus, dealing with the IRS from overseas can be a big hassle. Thankfully, the MyExpatTaxes expat tax software makes it easy to pay your taxes.
Our convenient software will guide you through the entire tax process, providing step-by-step instructions to pay your US expat taxes. If you have any questions, our helpful team is always here to provide answers!
What Happens If You Don’t Pay Owed Taxes?
Most taxpayers have wondered at one point or another, “What happens if I just don’t pay the taxes I owe?”
Some people believe that, if they can’t pay their tax bill by May 17 – the US tax payment deadline for expats – they shouldn’t pay at all. The opposite is true! It’s still necessary to pay as much US tax as you’re able to at that time. Even a partial payment can help you to avoid penalties and interest.
Your unpaid balance is subject to interest, and since it compounds daily, missed payments can add up fast. On top of that, you’ll also be subject to a late payment penalty. The IRS does allow payment plans for some individuals who can’t pay their full amount.
If you file your taxes after the deadline (without an approved extension) or don’t make your payment on time, you’re likely to be subjected to a late payment penalty. This late penalty increases the longer you go without paying. You could wind up paying as much as 25% of your tax owed just in penalties!
Tax Penalty Relief: Make-Up Years of Back Taxes
If you owe back taxes, the prospect of paying US expat taxes can be even more stressful. But MyExpatTaxes can help you get back on track thanks to our deep knowledge of the IRS’s Streamlining Procedure. We make it easy and quick to get you to file expat taxes and catch up on your taxes.
Furthermore, those who qualify won’t be subject to penalties. Contact us at MyExpatTaxes today to see if you qualify for our streamlining assistance program!