The Internal Revenue Service reminds taxpayers living and working outside the United States to file their 2023 federal income tax return by Monday, June 17.

This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship.

Qualifying for the June 17 extension

U.S. citizens or resident aliens residing overseas or on duty in the military outside the U.S. are allowed an automatic two-month extension to file their tax return and pay any amount due. A taxpayer qualifies for the June 17 extension to file and pay if:

• They are living outside of the United States and Puerto Rico and their main place of business or post of duty is outside the United States and Puerto Rico, or
• They are serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return.

To use the automatic two-month extension, taxpayers must attach a statement to their tax return explaining which of the two situations listed earlier applies.

Additional extensions

As a reminder, an extension of time to file a return does not grant an extension of time to pay taxes owed. Eligible taxpayers should estimate and pay any owed taxes by the June 17 deadline.

• Taxpayers who can’t meet the June 17 due date can request an automatic six-month extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.
• Taxpayers who need an extension of more than six months to meet either the bona fide residence or the physical presence test to qualify for the foreign earned income exclusion or to exclude or deduct the foreign housing costs must file IRS Form 2350, Application for Extension of Time to File U.S. Income Tax Return.
• Businesses that need more time must file Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns.
• Members of the military stationed abroad or in a combat zone during tax filing season may qualify for an additional extension of at least 180 days to file and pay taxes. More information can be found in the Extension of Deadline – Combat Zone Service Q&As.
• Spouses of individuals who served in a combat zone or contingency operation are generally entitled to the same deadline extensions with some exceptions. Extension details and more military tax information is available in IRS Publication 3, Armed Forces’ Tax Guide.

The IRS encourages anyone needing additional time to file an extension electronically. Filers may use IRS Free File, regardless of income, to request an automatic extension of time to file, or choose from several options at IRS.gov/extensions.

File to claim benefits

Many taxpayers living outside the U.S. qualify for tax benefits, such as the Foreign earned income exclusion and the Foreign Tax Credit, but they are available only if a U.S. return is filed.

In addition, the IRS encourages families to check out expanded tax benefits such as the Child Tax Credit, Credit for Other Dependents and Credit for Child and Dependent Care expenses, and claim them if they qualify. Though taxpayers abroad often qualify, the calculation of these credits differs depending upon whether they lived in the U.S. for more than half of 2023. For more information, see the instructions to Schedule 8812, Credits for Qualifying Children and Other Dependents, and the instructions to Form 2441, Child and Dependent Care Expenses.

Reporting required for foreign accounts and assets

U.S. citizens or resident aliens’ world-wide income is generally subject to U.S. income tax, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B, Interest and Ordinary Dividends, to their Form 1040 series tax return. Part III of Schedule B asks about the existence of foreign accounts such as bank and securities accounts and usually requires U.S. citizens to report the country in which each account is located.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Specified Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. For details, see the instructions for this form.

Further, separate from reporting specified foreign financial assets on a tax return, certain foreign financial accounts, such as bank accounts or brokerage accounts, must be reported by electronically filing Form 114, Report of Foreign Bank and Financial Accounts (FBAR), with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The FBAR requirement applies to U.S. persons with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2023.

The IRS encourages U.S. persons with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is available only through the Bank Secrecy Act E-Filing System. The deadline for filing the annual FBAR is April 15, 2024. However, FinCEN grants those who missed the April deadline an automatic extension until Oct. 15, 2024. There’s no need to request this extension. See FinCEN’s website for further information.

Report in U.S. dollars

Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

IRS Form 8938 requires the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign currency and currency exchange rates.

The instructions for FinCEN Form 114 state that for accounts with non-United States currency, a filer should convert the maximum account value into United States dollars by using the U.S. Treasury Department’s Bureau of the Fiscal Service’s exchange rates as of the last day of the calendar year at issue. If no Bureau of the Fiscal Service rate is available, a filer can use another verifiable foreign currency exchange rate.

Making tax payments

To ensure tax payments are credited promptly, the IRS urges taxpayers to consider the convenience of paying their U.S. tax obligations electronically. The fastest and easiest way to do that is via their IRS Online Account, IRS Direct Pay and the Electronic Federal Tax Payment System (EFTPS). These and other electronic payment options are available at IRS.gov/payments.

Reporting for expatriates

Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the U.S. during 2023 must file a dual-status tax return and attach Form 8854, Initial and Annual Expatriation Statement. A copy of Form 8854 must also be filed with the IRS by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.

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Source: IRS