June 11, 2014

You may live in Paris, Sydney or Tokyo, but as long as you carry an American passport or a Green Card, the United States is your tax home. And just like all American citizens and legal residents, you must file a federal tax return and pay federal income taxes. It’s the law.

Tax Day is June 15, Not April 15

Unlike citizens who live within the borders of the US, nonresident citizens and legal residents are automatically granted a two-month extension to file. The extension also applies to military personnel stationed overseas but not serving in a combat zone. (Longer extensions are granted to military personnel in combat zones.)

Related Post: How to Escape the Alternative Minimum Tax

The extension also grants eligible taxpayers an extra two months to pay any tax obligations without penalty, and without the need to file for an extension. That two month extension is set to end on Sunday June 15, 2014. Because the 15th falls over a weekend this year, nonresident American citizens and legal residents are allowed an extra day to file federal income tax returns and pay taxes. This makes the deadline June 16th.

American citizens and Green Card holders with 2013 annual adjusted gross income of $58,000 or less can use commercial software to complete and file their returns for free through the IRS Free File website. Taxpayers with higher incomes may also file their returns through the Free File website, but must use IRS Free File forms. If you lack access to a secure Internet connection for submitting your return electronically, download the tax forms from the IRS website and submit them by mail.

A (Second) Automatic Extension of Time to File

If you live abroad, you may have somewhat complex tax circumstances. For instance, you may work for a foreign employer that deducts Value Added Taxes from your paycheck. Or your accountant may be located in the States and is difficult to get in touch with. In either case, don’t panic. You may request an additional six-month extension until October 15 to file your tax return by submitting Form 4868, available on the IRS website. If you submit a paper return or application for automatic extension of time to file, submit your completed paperwork to the address below.

Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215

Unlike the automatic extension that applies to citizens and legal residents living overseas, Filing Form 4868 does not provide an extension for paying any taxes that you owe. Any payments not made by the June 15 deadline will be subject to interest charges as well as late payment penalties. For 2013 returns, the penalty is set at ½ of 1 percent of tax obligation, up to a maximum of 25 percent of your total tax obligation.

Foreign Tax Credit and Foreign Tax Exclusions

You may be able to claim either a foreign tax credit or a foreign tax exclusion on at least some of your income to reduce your tax burden to the IRS. Depending on your circumstances, you may claim a foreign tax credit or a foreign tax deduction for income taxes that are deducted from your wages or which you must pay to a foreign government. Tax credits reduce your tax liability while deductions reduce your total taxable income. You may also qualify for a foreign housing exclusion or a foreign housing deduction. None of these deductions, credits or exclusions apply if you work for the federal government (including military personnel or civil employees of the US government).

If You Need Help, Contact Optima

If you have questions concerning the filing of your tax return, don’t hesitate to contact Optima Tax Relief. Our tax professionals can help explain the details concerning foreign tax credits and exclusions to which you may be entitled.