2017 U.S. Tax Reminders for U.S. Citizens Abroad

By Karen A. Monroe and Olga Larionova


Filing 2016 returns

If you are a U.S. citizen or resident alien (green card holder) residing outside the U.S. on the regular due date of your return, which is usually April 15 in the year following the tax year, you are allowed an automatic two-month extension to file your return and pay any amount due without requesting an extension from the IRS.  However, interest will accrue on any taxes due, but not penalties. Therefore for calendar year returns, the automatic 2-month extension deadline is June 15.

In 2017 the tax return filing deadline is Tuesday, April 18, 2017 because April 15 is a Saturday and the Washington D.C. Emancipation Day holiday is being observed on Monday, April 17, 2017.[1]   

If you are unable to file by June 15 you can request an additional extension until October 16, 2017, by filing Form 4868 before June 15.  However, interest charges on any tax due will continue to accrue from April 18 and failure to pay penalties from June 15, which can be expensive.  For U.S. citizens or resident aliens living outside the U.S., the address for mailing your return is:  Department of the Treasury, International Revenue Service, Austin, TX  73301-0215.  Here is more information about filing your returns with a link to the Form 4868:  


FATCA and Form 8938

Under FATCA (Foreign Account Tax Compliance Act) there is another form that must be filed by all U.S. citizens with the 2016 tax return if the threshold amount of “specified foreign financial assets” exceeds a certain limit. 

If you are a U.S. taxpayer living outside the U.S. you must file the form 8938 if:

  • You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or
  • You are filing a joint return and the value of your specified foreign assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

For most people meeting the threshold the first tax year in which this new form applied was 2011.  This form also applies to U.S. citizens living in the U.S.  U.S. citizens who are living in the U.S. are subject to different (lesser) thresholdsHere is more information about the form, thresholds, and definition of “specified foreign financial assets:”


FBARs

FBARs (Foreign Bank Account Reports) need to be filed by all U.S. citizens and green card holders who hold financial account(s) (which is broadly defined) not physically located in the U.S. and which accounts had during any calendar year more than US$10,000 in the aggregate in the foreign account. This applies to the U.S. taxpayer whether the U.S. taxpayer is the beneficial owner of the account(s) or only has signatory authority over the account(s).  Historically, the due date for filing FBARs was June 30 for the prior calendar year. 

Important changes:  Starting in 2017 the deadline for filing has been changed to April 15. Because April 15 is on a Saturday and because of the observation of the April 17 holiday as mentioned above, FBARs for 2016 are due on April 18[2].  There is an automatic extension to file FBARs until October 15 each year.

Do you need to file an FBAR?

If you have, for example, two accounts, each with US$5,000, then an FBAR needs to be filed.  Once the filing obligation is triggered during any calendar year, then ALL accounts held outside the U.S. must be reported, no matter what the amount.  To complete the FBAR one goes through all of his or her foreign accounts and must list the HIGHEST amount in that account during the year, not just, for example, the highest bank balance on the monthly statement.  The form also requires bank name, address, and account number.  Even if you do not have beneficial interest over the foreign account and only signing authority, in general, the person having signing authority must also file an FBAR for that account(s).

The FBAR is not filed with your income tax return. There are no taxes due in connection with the FBAR filing.  However, if you hold a non-U.S. account, your income tax return filing requires that you check the box on Schedule B which asks if you have a non-U.S. account.

The penalties for failure to file the FBAR can be severe. 

A person who is required to file an FBAR and fails to properly file may be subject to a civil penalty not to exceed $10,000 per violation. If there is reasonable cause for the failure and the balance in the account is properly reported, no penalty will be imposed. A person who willfully fails to report an account or accounts identifying information may be subject to a civil monetary penalty equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation. Willful violations may also be subject to criminal penalties.

Starting July 1, 2013, FBARS must be filed electronically/online.

You can find FBAR E-Filing System website.

Instructions.


U.S. citizens living abroad who have not filed tax returns or FBARs

Effective September 1, 2012, there was introduced   “streamlined procedures” for U.S. taxpayers living abroad who have not filed tax returns or filed FBARs and are considered “low-compliance risk.”

Most U.S. taxpayers living outside the U.S. and paying taxes in their country of residence and who had not filed tax returns or FBARs are in this group.  The “streamlined procedures”  require tax return filings for the prior three years and FBARS for the last 6 years.  If you fall within this group, then you need to file returns for 2014, 2015 and 2016, and FBARS for 2011, 2012, 2013, 2014, 2015, and 2016 to be up to date. 

See here for the instructions for U.S. taxpayers living abroad.

In June 2014 the eligibility to participate in the “streamlined procedures” was extended to taxpayers residing in the U.S.   See here the instructions.

Importantly, a certification of non-willful conduct needs to be submitted as part of the “streamlined procedures”.

For those who are not eligible for the “streamlined procedures” there remains the possibility to enter the Offshore Voluntary Disclosure Program (“OVDP”) which became effective in January 2012--the third in a series, but unlike the two predecessor OVDP programs, there is no stated deadline for entering the program.  A summary of the OVDP is outside the scope of this tax reminder summary.

General tax information: General information Publication 54 (2016), Tax Guide for U.S. Citizens and Resident Aliens Abroad, available here