For Expats: Important Reminder About 2-Month Extension
Many expats may already be aware of the automatic 2-month extension to file their returns and pay federal income tax if they are a U.S. citizen or resident alien, and on the regular due date of your return 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. While this extension provides some flexibility while delaying late filing and late payment penalties, it’s essential to remember that this delay does not come without its nuances, especially when it comes to the interest on any outstanding tax balances.
Interest Still Accrues from the Original Filing Deadline
Although you have more time to file your tax return, interest on any taxes due will begin to accrue starting from the original April 15th filing deadline. The IRS charges interest on any unpaid taxes after the initial deadline, and this interest compounds daily.
So, even though you may now have until June 15th to submit your tax documents, if you owe money, it’s important to remember that interest will start accumulating as if you didn’t receive an extension. This can add up quickly, especially if your taxes owed are substantial.
How to Avoid Unnecessary Costs
To avoid interest from piling up and potential late payment penalties, here are a few tips:
Pay What You Can: Even if you can’t file your tax return by the original deadline, consider making a payment toward any balance due. By paying some or all of your tax balance, you’ll reduce the interest and penalties that will accrue.
File for an Additional Extension if Necessary: If you need even more time beyond the automatic 2-month extension, you can file IRS Form 4868 to request a further extension. However, this is an extension to file, not to pay, so you’ll still need to estimate and pay your taxes owed to avoid penalties.
Review Your Situation Regularly: Stay on top of your tax obligations and any correspondence from the IRS. Regularly check your online IRS account or contact a tax professional to ensure you're up to date on your tax filing status and payment obligations.
