When filing for your late expat taxes, it is important to keep several things in mind. In this post we will go over some of our tips for you to have a smoother process.
Late Filing Fees and Penalties
When you begin the process of filing, one of the biggest things to keep in mind will be the late filing fees and penalties that can happen. When you file late taxes the IRS can penalize you and will add interest on top of all that. However, the IRS has programs in place that can help reduce or completely eliminate late penalties.
American expatriates (Americans who live outside the US) may qualify to eliminate their penalties through the IRS’s streamlined program. This program is highly recommended for expats who are late filers. This program is suitable for those who have good enough reason that they filed late. Often times the IRS will excuse for reasons regarding genuinely not knowing the need to file. In other programs, the IRS will waive penalties for reasons regarding experiencing a natural disaster or critical life event. It is important to note that the IRS charges penalties only on tax returns that reveal a balance that is due. Therefore, if you owe zero tax or are getting a refund then no penalties will be applied. Even if the return is filed after deadline you will still owe nothing.
Strategies For Filing Late Taxes
Gather all the information you can on the deductions and tax breaks you could qualify for. This will help you calculate the lowest possible US tax in order to make sure that your penalty are as slow as possible. Tax credits and tax deductions you can take advantage of are the foreign earned income exclusion (FEIE) and the foreign tax credit. It is important for you to see if you qualify because both of these tax breaks can reduce your US federal tax. As previously mentioned, if you don’t owe any tax, meaning the amount owed is zero or you are getting a refund, the IRS won’t penalize you for filing taxes late.
Now if you are receiving a refund, send your expat tax returns to the IRS within three years of the original April 15th deadline. Federal tax refunds expire after this time period which means you will lose out and the IRS keeps the money.
Legal Trouble If You File Late?
The IRS wants the money that they are owed. With that being said, they are motivated to give you time and options. This aids to file missing tax returns to pay owed taxes. An outcome of filing taxes late is that the IRS can revoke your passport or ask that it be denied. Expats are heavily devastated at this outcome as this directly effects their travel for a job that they may have or personal. Typically, the IRS only executes such an action if the person has more than $52,000 of unpaid federal taxes and has been avoidant in setting up any kind of payment agreement. The IRS could also prevent expats from apply for Social Security. Further but less common, the IRS begin an investigation when they are suspicious of wrong doing.
The IRS can start the process of collections. This process can begin anytime after your tax return is processed. This is typically six to eight weeks from when you submitted it. To avoid this, it is recommended to pay the full amount owed. However, if you cannot afford what is owed a payment arrangement can be made where you pay your balance over time.
Hire a Professional
Beginning to file your tax return may sound like confusing if you are starting late. This is when it is highly encouraged to hire a professional! Certified public accountants and enrolled agents are able to deal with the IRS on your behalf. This means you don’t have to worry about that part of the tax filing process. This is to your benefit, largely because tax professionals are best equipped in dealing with the IRS. CPA’s are more familiar with your circumstance and are up to date with the latest rules and regulations.
Having a tax professional that is very knowledgeable about expat taxes is important because the IRS’s procedures and programs have undergone many changes. At Americas Tax Firm we are dedicated towards helping you in your tax situation! Seek help today from a licensed professional to guide you through your next tax return.