Tax Tips for U.S. Americans Abroad
Knowing the US tax extension deadline for both filing and paying taxes can easily slip the mind. Especially if you’re a US citizen abroad preoccupied with expat life. However, it’s important to partake in your citizenship’s tax duty. This is to prevent penalties and getting into a negative standing with the IRS.
It’s even more important to realize that both the filing and tax deadlines have been changed this year due to the coronavirus. Therefore, we’re going to provide the tax information you need right now as an American abroad.
Why We Need to File US Taxes
Every year, it’s our duty as Americans – both living in the US and abroad – to report our worldwide income. This is as long as we pass a certain tax filing threshold. The obligation of filing can be tracked down to our US passports which state that such income must be reported to the IRS once a year.
For example, if you are filing single, and under 65 years old, your gross income must be at least $12,200. If you are over 65, your gross income must be at least $13,850. When you check to see where your income falls on the threshold, be sure to convert your foreign money into US dollars.
The usual tax filing extension date for Americans abroad is not going to be April 15. In fact, each expat gets an automatic 2-month extension to file taxes.
Although, with the coronavirus now affecting everyone and everything worldwide, the IRS recently announced they are moving their tax filing date to a new date. We’ll provide information about the coronavirus and expat taxes with new deadlines below.
Paying Taxes as an American Abroad
Questions that we encounter from our customers on a regular basis is about double taxation. Now, being double-taxed from your home country (USA) and the foreign country you’re living in is not fun for anyone, but sometimes it happens.
The US is one of only two countries in the world that have tax laws follow their citizens wherever they live around the world. However, the US has made an effort to lessen the effects of double taxation. They created both Tax Treaties and Totalization Agreements, where a large number of countries agreed to prevent US citizens from double taxation.
Additionally, there are expat tax benefits like the Foreign Earned Income Exclusion (FEIE), and the Foreign Tax Credit that support Americans abroad to limit unnecessary tax payments.
As for this year’s tax season, the FEIE helps you exclude up to $105,900 of foreign income. If your yearly income was $112,800 from working overseas and you subtract the FEIE exclusion, you’ll just get a small percentage taxed by the IRS. This will usually be covered by the standard deduction or other deductions MyExpatTaxes will find for you.
There is typically no US tax extension deadline for Americans abroad, but only a tax filing deadline. This means that Americans abroad need to pay their due taxes on April 15 just like their fellow Americans back home. However, with the coronavirus hitting worldwide this year, the IRS actually did extend the tax deadline for everybody, which we’ll share below.
New US Tax Extension Deadline for 2020
As we explained above, the typical extension deadline for filing US taxes as an American abroad is June 15. There is also the option of filing for an even greater extension to October 15. Yet, you will need to fill out a specific form to do that. For example, you can use the MyExpatTaxes software for filing all your extension forms!
However, as explained in our recent coronavirus blog post, the IRS tax authorities have initiated a new rule for tax season 2019. This tax season is in this year of 2020). The IRS stated that the US tax extension deadline is now July 15. This goes for both filing and paying US taxes from abroad.
This July 15 deadline date is for now, only for this year. It is most likely once we move into 2021 the tax paying and filing deadlines will be moved back to their original spots.
FBAR Deadline for 2020
As of this year, the FBAR deadline remains the same. It is April 15th, with an automatic extension to October 15th. Realistically though, you can say the FBAR deadline is actually in October.
The FBAR is a form you must fill out for the Financial Crimes Enforcement Network (FinCen). This is a bureau of the US Treasury that collects information about all financial transactions from any US citizen who is a resident of a foreign country. This is to combat illegal monetary activity (ie: international money laundering).
To file for the FBAR, it depends on how much money has been in all your bank accounts. This includes personal and business accounts. Plus, accounts where you have signature authority over. If you have or had over $10,000 at any one time during the 2019 tax year, you’ll need to file an FBAR for this tax season.
Our expat tax software system, MyExpatTaxes, has all the FBAR forms you need to file right on time. Plus, our team will do everything they can to make you tax compliant and avoid unnecessary penalties and fees from the IRS. Our software tax management platform takes away the complexities of US taxes. It’s easy to walk through as an American expat – saving you time and money.
Avoid Expat Tax Penalties with MyExpatTaxes
There is some important information regarding tax penalties for US taxes. Three penalties from the IRS can happen to Americans both inland and abroad who forget to file and/or pay taxes.
The three penalties for late taxes are:
- First – failure to file: 5% interest will be added to your owed taxes for every month your tax return is late. This can go up to 25%, or four months.
- Second – failure to pay: you can be penalized with a 5% interest for every month you did not pay taxes to the IRS. This will go on until you pay the total amount, or interest reaches 25%.
- Third – interest on the due tax: you’ll get interest added on to the amount you owe every time you need to pay US taxes to the IRS but don’t.
It is possible to avoid tax penalties and make up for the years missed from paying and/or filing US taxes. Our Streamlined Procedure program through our app will be just what you need and is incredibly affordable – compared to other services.
File your federal tax return today and be eligible to receive the 2020 stimulus check!
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