Anticipating that many of you may not yet be ready to file, I am going to explain this week a way that allows overseas US taxpayers to obtain more time to file. Some of you may already know about this, especially if you live in a foreign country where it is always difficult to collect your tax documents, even without a global pandemic, and have been in this situation before.
Americans abroad have an extraordinary power that only belongs to them and allows them to request an extension of two additional months to file their federal tax return from October 15 to December 15. This power belongs only to them, and does not extend to Americans in the USA or foreign nationals in the USA.
How can US expats request this extra time?
REQUESTING A TAX RETURN FILING EXTENSION TO OCTOBER 15
In a normal year, US federal tax returns are due on April 15. US taxpayers living in the USA can request an extension of six additional months by filing Form 4868.
US taxpayers living overseas automatically get two additional months, from April 15 to June 15, without needing to file any forms. All that they are required to do in order to secure these two extra months is to write the following note on their tax return, to be filed by June 15:
Pursuant to Treasury Regulations 1.6081-5(a), the taxpayer/s is/are granted an extension of time to file their 20XX income tax return until June 15, 20XX. The taxpayer/s has/ve a tax home and abode outside the United States and Puerto Rico on April 15, 20XX.
On top of the first page of Form 1040, they must also write: TAXPAYER ABROAD
If the taxpayer living abroad needs additional time to file their tax return, because the automatic two months are not enough, they can also file Form 4868 to request additional time. The only difference that applies to them is having to check the box circled in red below, that indicates that they are out of the country at the time of filing this extension request.
The catch is, this extension only gives the US expat just FOUR additional months from their June 15 normal filing deadline.
They get two months automatically, plus four months extra through Form 4868, six months total. This is the same number of extra months that tax filers living in the USA get.
US expats may think this is not quite fair. The reason US expats get the additional two months automatically, presumably, is because the IRS recognizes that it is harder to gather tax documents abroad; that most US citizens overseas have to file two complete set of tax returns, not just one; that finding US tax professional help is harder when living overseas and a host of other reasons that make it harder to file a US tax return from abroad than from the comfort of the USA.
So, if US resident taxpayers can ask for six additional months, and US expats have a harder time filing their taxes, shouldn’t they get more time than the time granted to US residents?
The answer is yes, and this is precisely why they have the power to two additional months of time to file.
REQUESTING AN ADDITIONAL EXTENSION TO DECEMBER 15
In 2020 everyone got three extra months automatically when the filing regular tax filing deadline was postponed to July 15. Form 4868, the IRS informed us, could be used in 2020 to request additional time. But, because the IRS had already granted everyone three extra months due to the pandemic, Form 4868 only extended the time to file for three additional months, half the time from the usual six granted in an extension. The federal extension filing deadline remained October 15, as if there had been no pandemic.
US taxpayers living in the USA have cannot extend their tax filing deadline further, unfortunately, no matter how much the pandemic has impacted their lives and their families. With more than 22% of the world’s confirmed cases of COVID-19 and over 21% of COVID-19 confirmed deaths in the USA, this is a bit surprising.
The only US based taxpayers who get additional relief so far this year are those residing in federally declared disaster areas, such as the victims of hurricane Laura and the California and West Coast wildfires, whose filing deadlines were extended to December 31 and December 15 respectively.
It’s one of those things that makes one go
For US taxpayers living outside the USA, the solution comes courtesy of Treasury Regulation Sections 1.6081-1(a) and (b).
HOW TO REQUEST TWO ADDITIONAL MONTHS OF TIME TO FILE
These regulations allow taxpayers residing abroad to request, in writing, two additional months of time beyond October 15 to file their tax return. The written request has to be submitted to the IRS and include the following information:
- The particular tax return for which you are requesting the extension (Form 1040, for example)
- The year for which you are requesting the extension (2019 in this case)
- And the reason why you need this extra time (for example, because due to disruptions caused by the coronavirus global pandemic you need additional time to collect the documents you need to prepare your tax return)
Below is an example of what this written request may look like:
I request an extension of time to file my 2019 Form 1040 until December 15, 2020. I need this additional time to gather (name your foreign country of residence) tax documents and US tax documents to prepare a complete and accurate US tax return. I live in (name of your country) and due to disruptions in international travel, communications, and mailings as a result of the pandemic, this process is taking much longer this year.”
Once you have your request ready, add your taxpayer identification information (name, SSN, address, spouse information if a joint tax return), sign it, date it, and mail it to your regular IRS Service Center. In 2020, for US expats this address is:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
If you know that you will need this extra time, do not wait until October 15 to mail this letter. I highly recommend that you prepare it and mail it immediately.
I also highly recommend that you take a photo of your letter, of the envelope with the letter in it, the post mark on the envelope, you at the foreign post office holding the envelope, and any other photographic (appropriate please!) that you can think of. To any extent possible, please mail the letter by registered mail. You will want to track that envelope and request updates of its delivery. Save a copy of the delivery confirmation once you receive it and file all the supporting documents with your tax return records.
Why all these precautions?
Because it is not unheard of that the IRS will not recognize the date of the international postmark as the request filing date if they receive your letter after October 15. Also, because sometimes, and especially during pandemics, letters get lost in the mail.
You will be grateful to have as much evidence as possible that you requested this extension timely if something goes wrong, especially if your tax return includes any of the pesky information returns that carry automatic $10,000 or $25,000 late filing penalties, like Form 5471 or 5472.
Better to be safe than sorry.
And with this, I leave you until next week, and with Insight #8:
“US taxpayers abroad get three chances to extend their tax filings if they need additional time”