IL Postcard

Tax Deadline Looming? Get 6 More Months

Date: 03/20/2008

Friday, March 21, 2008

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You've moved overseas to start a new life. You've left your old job, your old worries—maybe even your kids—behind. But there's one thing you didn’t escape…that shadow that sticks with you no matter where you roam: your U.S. tax obligation. And now, as an overseas filer, you have a whole new set of rules to contend with.

For 2007 tax returns, Tax Day for Americans living in the States is April 15. But overseas Americans have until June 15 to file their returns...and can extend this deadline a further four months simply by asking (no explanation necessary).

If you reside overseas, full-time or part-time, you have two tax burdens: one in the country where you've taken up residence and one back in the U.S. Remember, an American never loses his responsibility to comply with the U.S. tax rules.

The good news is that, as an overseas American, you are automatically granted a two-month extension to June 15 to file (and pay your tax). You don't have to request this extension in advance. When the time comes to file, simply attach a statement to your return explaining that you were either:

1. Living outside the U.S. and Puerto Rico and that your main place of business or post of duty was outside the U.S. and Puerto Rico;

or

2. In the military or naval service on duty outside the U.S. or Puerto Rico.

If you need more time, better still is Form 4868, used to grant an extension to Oct. 15, 2008. No signature and no reason will be required for this extension. But you have to make this request before April 15.

The automatic two-month extension for overseas Americans includes an extension of time to pay the tax. but the Form 4868 extension to Oct. 15 is an extension to file only, not an extension of time to pay the tax.

You will be required to pay interest on any 2007 tax payment made after April 15, but you will not be required to pay the late-payment penalty for the period from April 15 to June 15.

Generally, the IRS treats payments made —and tax returns filed —as received by the IRS on the date they are received by the U.S. Postal Service or a domestic courier service. Penalties could be applied by the IRS on late payments and, if applicable, late filed returns under certain circumstances, including those received from overseas.

Consult a tax professional if sending tax documents from countries whose mail or courier systems are subject to lengthy delays.

If you are late in filing your taxes, the IRS may impose a penalty. But even if there are penalties, the IRS may waive them if the delay is due to "reasonable cause." The IRS doesn't like to pin itself down by trying to define the term "reasonable cause" —you have to write in with an explanation and hope for the best. The instructions for requesting elimination of a penalty for reasonable cause are found in Notice 433 on the IRS website.

You should keep in mind that electronic filing is one means of avoiding mailing delays and possible penalties resulting from such delays. I generally recommend the electronic filing method to my clients overseas.

Richard Leonard
For International Living

Editor's note: Richard Leonard worked with the IRS for a commendable 28 years —eight of which were spent as an overseas employee. These days, Richard runs his own consulting firm, providing tax advisory services to American citizens, residents, and foreign aliens the world over, as well as small firms doing business overseas. Richard knows his stuff and is committed to educating the rest of the U.S. tax-paying world.

In years of looking, we've never found a reliable, current, complete, and comprehensible resource on the subject of taxes for the American abroad...so we created one ourselves, with Richard's help. You won't find a more up-to-date and user-friendly guide to how to figure your liability to Uncle Sam than the 2008 edition of The Expatriate's Tax Bible: The Complete Guide to U.S. and Foreign Taxes for the American Abroad.