How to File Taxes as an Expat
Filing your taxes as a U.S expat living abroad? Find out how you can do it online with Taxfyle!
Every year, as Tax Day rolls around, people begin to scurry. Maybe their forms aren’t filled out or one of their W-2s never came in the mail. Whatever the problem, you don’t want to be late with your taxes. What many people don’t realize, though, is that they have another choice.
Instead of filing your taxes late, you have the option of filing IRS Form 4868. Also known as the “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return,” Form 4868 gives filers an extra six month to file their taxes. Good news, right? Before you extend your tax return deadline out until October, read on to learn more about what an extension can mean for your finances.
Filing a Form 4868 is simple – if you fill it out and send it in, you’re automatically granted an extra six months to file your taxes, no questions asked. The problem is that a lot of people misunderstand this extension. Despite not actually knowing quite what you owe because you’re missing some documents, a Form 4868 doesn’t actually give you more time to pay your taxes; payment is still due on April 15. If there was also an extension to pay attached, you can be sure more than 12% of people would file a Form 4868 year after year.
If you don’t pay your taxes on time, even if you file a Form 4868, you’ll start accruing interest on what you owe. Typically, the IRS charges 0.5% interest per month on any outstanding tax bill, so if you haven’t paid by October, you’re already six months behind. By filing for an extension, however, you do avoid filing penalties, which can be as much as 5% of your outstanding tax bill every month your filing is overdue. That’s a much larger penalty fee, which is why it’s so important to file your tax return on time or file for an extension.
What should you do if you require extra time to pay? While Form 4868 won’t help you with that, the IRS does have ways of supporting you. In particular, the IRS is generally happy to work with individuals to set up a payment plan for those who can’t afford to make their payments on time. Don’t wait until the October 15 filing extension date to ask about a payment plan, though; you’ll want to start putting those supports in place by the standard April 15 deadline.
Form 4868 specifically applies to individual income tax, not to any kind of business tax filing. In other words, you can only file for a tax extension with this form for yourself or for your household if you and your spouse file taxes jointly. Some people also don’t need to file a Form 4868 because they’re granted an extension, even without the form. Members of the military, for example, get 180 days to file their taxes after leaving a combat zone. Individuals who live and work primarily outside of the United States and Puerto Rico, but who are US citizens, receive an automatic 2 month filing extension.
Another case when you might consider a Form 4868, but not actually need one, is if your place of residence has been impacted by a natural disaster. If your region is impacted by a major event in the immediate run-up to tax season, the IRS may offer an extension. In 2019, the IRS did this for those in affected parts of Alabama, which were hit by a major storm in March 2019. The IRS has a disaster relief page with all of this information that you can check to find out your status, but if you’re uncertain, it’s always better to file for an extension than assume you’ve been granted one.
We’ve already established that Form 4868 provides for an automatic extension when it comes to filing taxes, but what do you need to do to file one? The answer is, not much. In fact, it’s one of the simplest forms on the entire IRS website. All you need to provide is your name, address, and social security number, as well as information on your estimated tax liability and what you’ve paid so far. Cover all that, mail it in, and you’re done. You can also submit your Form 4868 online through the IRS’s website or your tax provider.
Though you can file your extension form either by mail or online, if you make any kind of electronic payment but don’t file your return, Form 4868 will be automatically filed for you. This includes if you pay online or by phone.
Are there reasons other than missing documentation that might lead you to file a Form 4868? In fact, there are a number of them, and one of the most common is to avoid an audit.
Tax audits can happen for many reasons, including because the IRS has noted math errors in a filing, in cases where there is a failure to report income, or if an individual seems to have taken too many or suspicious deductions. When you’re hit with an audit, the best thing you can do is to organize your documents – but ideally, you’ll avoid an audit in the first place. This is where Form 4868 comes into the picture. Often, the main thing you need to prevent an audit is some extra time to sort through your deductions and ensure that everything is in proper order. Just pay your estimated taxes and then take your time with the details; this will protect your business in the long run.
Another reason to file a Form 4868 is because you’re dealing with personal upheaval. Maybe you’re in the process of moving between states, you’re taking care of a sick loved one, or otherwise dealing with a family crisis. If you think that major personal events will interfere with your ability to focus on the fine details involved in filing your taxes, take the exception. You don’t even need to tell the IRS why you’re seeking that extra time. It’s automatically yours.
While anyone can file for an extension, there are some myths about taking extra time to file that you should feel free to ignore. In fact, the two more common things you’ll hear about requesting a filing extension are directly contradictory. Some people think that by requesting an extension, you’re more likely to get audited because the IRS will be suspicious of the fact that you’ve taken extra time. On the other side, some people believe that those who take extensions are actually less likely to get audited because the auditors have already hit their quotas. Both can’t be true and the reality is that neither is an accurate interpretation.
If you’re concerned about filing your taxes correctly and in a timely fashion, it’s time to take a step back and ask for help. Don’t just file an extension, but get in contact with a tax professional today. At Taxfyle, we connect individuals with tax experts who can transform your pile of documents into a completed tax return. Just answer a few questions, upload, and go. It’s a more affordable way to do your taxes, but most importantly it’s a simpler approach to a complicated process.
Don’t let deadlines and anxiety leave you facing penalty fees and interest payments – just focus on the facts. Contact Taxfyle today to learn more about how we can help you file your taxes quickly and accurately. That’s the Taxfyle promise: easier filing at a lower cost. We guarantee it.
Get the latest posts delivered right to your inbox