RAO Davao City

United States Military Retiree Activities Office Davao City, Philippines


Posted by Service Officer on June 8th, 2008

For American expatriates, the tax filing deadline this year is 16 June. This means that the tax return must be at the IRS Service Centre in Austin, Texas by the due date. Postmarks do not count. For this reason, electronic filing is the better option over snail mailing. The due date can be extended by filing Form 4868 – Application for Automatic Extension Of Time to File U.S. Individual Income Tax Return. This form extends the due date to 15 OCT 08. However you will owe interest on any unpaid taxes that were due 14 APR for the 2007 calendar year. IRS may also assess a late payment penalty of 1/2 of 1% of any tax not paid by the regular due date up to 25%. A late filing penalty of 5% per month up to 25% can also be assessed if the return is filed late. Form 4868 can either be filed electronically or by post. Expatriates making a payment with the Form should send to the IRS Service Centre at: PO Box 660575, Dallas TX 75266-0575. Those not making a payment can send to: Austin, TX 73301-0215. [Source: The Tax Barron Jun/Jul 08 ++]

IRS STATUTE OF LIMITATIONS: Often American expatriates do not file a US tax return under several mistaken assumptions. The three main ones are:

• They file and pay taxes to a foreign country of residence.

• They earn less than the foreign earned income exclusion.

• After many years of not filing to remain under the radar.

Actually US tax laws require US citizens and resident aliens to report their worldwide income annually unless their income is below the combination of a Standard Deduction and Exemption amounts. In 2007 a Single filer’s Standard Deduction was $5,350 and Exemption $3,400. So unless as a Single filer you were below this $8,750 ($5,350 + $3,400) threshold, filing an income tax return in a foreign country does not excuse you from filing stateside. The Foreign Earned Income Exclusion (FEIE), worth $85,700 in 2007, is intended to help US filers from being taxed twice on their foreign income. But FEIE cannot be applied against investment and other forms of income. Nor can it be taken if IRS challenges a nonfiler to report prior year foreign earnings and decides against allowing FEIE. So even if those foreign earnings are excluded from US taxation, they are still reportable. Staying under the radar is risky, especially as IRS is steadily increasing its reach via international tax treaties and auditors. The worst scenario is to be discovered and face possible criminal sanctions for tax avoidance.

Under IRS Statute of Limitations, taxpayers have three years to claim a tax refund. IRS has three years to audit a tax return or assess additional taxes. And ten years to collect outstanding tax liabilities. Anyone who has not filed a US tax return for some years from overseas should take the offensive approach by filing rather than being put on the defensive by an aggressive and suspicious IRS auditor. The Service asks that three years returns be filed. [Source: The Tax Barron Jun/Jul 08 ++]

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