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Deadlines Approach for Owners of Foreign Assets and Nonresidents
The IRS has issued a reminder about upcoming filing obligations to taxpayers with foreign-related connections. Citizens and resident aliens living abroad may have to file by June 17, 2013, for example. Owners of certain foreign accounts must file by June 30, 2013.
The IRS has found that some taxpayers living abroad or holding foreign assets are not familiar with their filing obligations, despite the fact that the requirements are not new. The agency wants to ensure through outreach initiatives that more taxpayers are brought into the tax system before they risk penalties for late filing or noncompliance.
U.S. taxpayers abroad
The IRS reminded U.S. citizens and resident aliens (green card holders) living abroad or serving in the military outside of the U.S. (on April 15) that their filing deadline for 2012 income taxes is June 17, 2013. These taxpayers get an automatic two-month extension from the April 15 deadline to file and to pay; plus, they get two additional days this year since the June 15 deadline falls on a Saturday.
To obtain the two-month extension until June 17, taxpayers must attach a statement to their return explaining why they are entitled to the extension. Taxpayers can request an additional extension until October 15, 2013; payments after June 17 will be subject to interest and late-payment penalties.
Special rules apply to taxpayers serving in a combat zone.
A nonresident alien owes U.S. taxes on income that is effectively connected with a U.S. trade or business, and on income that is fixed, determinable, annual, or periodic. The former is taxed at graduated rates; the latter is subject to 30 percent withholding. Taxpayers must file Form 1040NR.
Persons receiving wages or non-employee compensation subject to U.S. withholding had to file a 2012 return by April 15, 2013. Individuals who do not receive wages on non-employee compensation but who have U.S. income must file by June 17, 2013. Taxpayers can request an automatic extension until October 15 if they cannot meet the deadline.
Taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2012 must file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). These reports are due June 30, 2013 and are filed with the Treasury Department rather than the IRS. No extensions are available. However, some individuals with signature authority only and no financial interest in a foreign account have an extended deadline of June 30, 2014.
The IRS noted that Part III of Schedule B of Form 1040 asks taxpayers if they had an interest over a financial account in a foreign country. Taxpayers must have answered these questions independent of any obligation to file an FBAR.
Foreign financial assets
Although not necessarily subject to an impending deadline, the IRS also reminded taxpayers, including U.S. citizens, resident aliens, and certain nonresident aliens, that they may be required to file Form 8938, Statement of Specified Foreign Financial Assets, with their annual income tax return. Filing is required if the value of the assets exceeds certain thresholds, generally $50,000 or more. The instructions for Form 8938 provide more details on taxpayers’ reporting obligations.
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