IRS Warns Taxpayers with Foreign Assets of Filing Obligations

The Internal Revenue Service issued a reminder Thursday to U.S. citizens and resident aliens, in addition to dual citizens, that their tax-filing deadline is approaching.

The warning included those with dual citizenship who have lived or worked abroad during all or part of 2012. The IRS said they may have a U.S. tax liability and a filing requirement in 2013.

The filing deadline is Monday, June 17, 2013, for U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return. There is a bit of an extension, as eligible taxpayers get two additional days because the normal June 15 extended due date falls on Saturday this year. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies.

The IRS referred taxpayers to the U.S. Citizens and Resident Aliens Abroad page on its Web site for additional information additional information on extensions of time to file.

Nonresident aliens who received income from U.S. sources in 2012 also must determine whether they have a U.S. tax obligation, the IRS noted. The filing deadline for nonresident aliens can be April 15 or June 17 depending on sources of income. For more information on these obligations, see the Taxation of Nonresident Aliens page on IRS.gov.

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.
Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds, the IRS noted. Instructions for Form 8938 explain the thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted and what information must be provided.

Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2012 must file Treasury Department Form TD F 90-22.1. This is not a tax form and is due to the Treasury Department by June 30, 2013. For details, see Publication 4261: Do You Have a Foreign Financial Account? While this form can be filed on paper, the Treasury Department encourages taxpayers to file it electronically.

Taxpayers abroad can now use IRS Free File to prepare and electronically file their returns for free, the IRS noted. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes of $57,000 or less can use brand-name software to prepare their returns and then e-file them for free.

Taxpayers with an AGI greater than $57,000 who don’t qualify for Free File can still choose the accuracy, speed and convenience of electronic filing. Check out the e-file link on IRS.gov for details on using the Free File Fillable Forms or e-file by purchasing commercial tax prep software.

A limited number of companies provide software that can accommodate foreign addresses. To determine which will work best, get help choosing a software provider. Both e-file and Free File are available until Oct. 15, 2013, for anyone filing a 2012 return.

Any U.S. taxpayer here or abroad with tax questions can use the online IRS Tax Map to get answers. An International Tax Topic Index page was added recently (see IRS Debuts Discovery Tool for International Taxpayers). The IRS Tax Map assembles or groups IRS forms, publications and web pages by subject and provides users with a single entry point to find tax information. 

Separately, the IRS released for public comment on Wednesday draft versions of three forms for complying with the Foreign Account Tax Compliance Act, or FATCA (see IRS Releases More Draft FATCA Forms for Comment).

They are Draft Form W-8BEN “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals),” Draft Form W-8BEN-E “Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)”  and Draft Form W-9 “Request for Taxpayer Identification Number and Certification.”