Wednesday, April 26, 2017

IRS Explains How Offer in Compromise Works

Taxpayers who have a tax debt they cannot pay may have heard that they can settle their tax debt for less than the full amount owed. It’s called an Offer in Compromise.

Before applying for an Offer in Compromise, here are some things to know:
  • In general, the IRS cannot accept a settlement offer if the taxpayer can afford to pay what they owe. Taxpayers should first explore other payment options. A payment plan is one possibility. Visit IRS.gov for information on Payment Plans – Installment Agreements.
  • A taxpayer must file all required tax returns first before the IRS can consider a settlement offer. When applying for a settlement offer, taxpayers may need to make an initial payment. The IRS will apply submitted payments to reduce taxes owed.
  • The IRS has an Offer in Compromise Pre-Qualifier tool on IRS.gov. Taxpayers can find out if they meet the basic qualifying requirements. The tool also provides an estimate of an acceptable offer amount. The IRS makes a final decision on whether to accept the offer based on the submitted application.
  • Taxpayers wishing to file for an Offer in Compromise should visit IRS website’s Offer in Compromise page for more information. There taxpayers can find step-by-step instructions as well as the required forms. Taxpayers can download forms anytime at www.irs.gov/forms or call 800-TAX-FORM (800-829-3676) and ask for Form 656-B, Offer in Compromise booklet.
Additional IRS Resources:

Monday, April 24, 2017

IRS Issues Tips on What to do After the Tax-Filing Deadline

Tax day has come and gone for most people, but some taxpayers may still be dealing with their taxes. The IRS offers these tips for handling some typical after-tax-day issues:

Didn’t File by April 18?

There is no penalty for filing a late return after the tax deadline if the taxpayer receives a refund. Penalties and interest only accrue on unfiled returns if taxes are not paid by April 18. Anyone who did not file and owes tax should file a return as soon as they can and pay as much as possible to reduce penalties and interest. IRS Free File is available on IRS.gov to prepare and file returns electronically through October 16.

“Where’s My Refund?”

The “Where’s My Refund?” tool is available on IRS.gov, IRS2Go and by phone at 800-829-1954. Taxpayers need specific information to use the “Where’s My Refund?” tool. That information includes the primary Social Security number on the return, the filing status (Single, Married Filing Jointly, etc.) and the amount of refund.

Changing Withholding?

Events – like a change in marital status – during the year may change the exemptions, adjustments, deductions or credits a taxpayer expects to claim on next year’s return. Employees can use the IRS’s online Withholding Calculator to figure and then adjust their withholding by filling out a new Form W-4, normally with the company’s personnel office. Taxpayers who do not have taxes withheld from their pay or don’t have enough tax withheld, may need to make estimated tax payments. Taxpayers who are self-employed normally need to make estimated payments that can be adjusted to avoid a balance due in the future.

Need to View a Tax Account Balance or Make a Payment? Taxpayers who owe taxes can view their balance, pay with IRS Direct Pay, by debit or credit card or apply for an online payment agreement. Before accessing your tax account online, you must authenticate your identity through the Secure Access process. Several other electronic payment options are available on IRS.gov/payments. They are secure and easy and taxpayers receive immediate confirmation when they submit their payment.

Need to Fix an Error on a Return?

Form 1040X, Amended U.S. Individual Income Tax Return, must be filed by paper and is available on IRS.gov/forms at any time. Do not file an amended return before the original return has been processed. Taxpayers should file an amended tax return to change the filing status, or correct income, deductions or credits. The IRS generally corrects math errors and mails a request for any missing documents. Use "Where's My Amended Return?" tool to track the status of your amended return. It will take up to three weeks after mailing the return to show up in the IRS system. Processing can take up to 16 weeks.

Need Help Responding to an IRS Notice or Letter?

An IRS notice or letter will explain the reason for the contact and give instructions on how to handle the issue.  Most questions can be answered by visiting the “Understanding Your Notice or IRS Letter,” on IRS.gov. Taxpayers can call the phone number included in the notice if they still have questions. Taxpayers have fundamental rights under the law. The “Taxpayer Bill of Rights” presents these rights in 10 categories. This helps taxpayers when they interact with the IRS. Publication 1, Your Rights as a Taxpayer, highlights a list of taxpayer rights and the agency’s obligations to protect them. If normal IRS channels don’t solve the problem, the Taxpayer Advocate Service is available at 877-777-4778.

Watch Out for Scams

Aggressive and threatening phone calls by criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS will never contact a taxpayer via e-mail, text or social media. Any e-mail that appears to be from the IRS about a refund or tax problem is probably an attempt by scammers to steal information. Forward the e-mail to phishing@irs.gov. The first IRS contact with taxpayers on a tax issue will be by mail.

Thursday, April 20, 2017

Important Facts about Filing Late and Paying Penalties

April 18 was this year’s deadline for most people to file their federal tax return and pay any tax they owe. If taxpayers are due a refund, there is no penalty if they file a late tax return.

Taxpayers who owe tax, and failed to file and pay on time, will most likely owe interest and penalties on the tax they pay late. To keep interest and penalties to a minimum, taxpayers should file their tax return and pay any tax owed as soon as possible.

Here are some facts that taxpayers should know: 
  1. Two penalties may apply. One penalty is for filing late and one is for paying late. They can add up fast. Interest accrues on top of penalties
  2. Penalty for late filing. If taxpayers file their 2016 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if they owe less than $205, 100 percent of the unpaid tax. Otherwise, the penalty can be as much as 5 percent of their unpaid taxes each month up to a maximum of 25 percent. 
  3. Penalty for late payment. The penalty is generally 0.5 percent of taxpayers’ unpaid taxes per month. It can build up to as much as 25 percent of their unpaid taxes.
  4. Combined penalty per month. If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5 percent per month.
  5. Taxpayers should file even if they can’t pay. Filing  and paying as soon as possible will keep interest and penalties to a minimum. IRS e-file and Free File programs are available for  returns filed after the deadline. If a taxpayer can’t pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS.  
  6. Payment options. Taxpayers should explore their payment options at IRS.gov/payments. For individuals, IRS Direct Pay is a fast and free way to pay directly from a checking or savings account. The IRS will work with taxpayers to help them resolve their tax debt. Most people can set up a payment plan using the Online Payment Agreement tool on IRS.gov.
  7. Late payment penalty may not apply. If taxpayers requested an extension of time to file their income tax return by the tax due date and paid at least 90 percent of the taxes they owe, they may not face a failure-to-pay penalty. However, they must pay the remaining balance by the extended due date. Taxpayers will owe interest on any taxes they pay after the April 18 due date.
  8. No penalty if reasonable cause.  Taxpayers will not have to pay a failure-to-file or failure-to-pay penalty if they can show reasonable cause for not filing or paying on time.
Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Additional IRS Resources:

Wednesday, April 19, 2017

IRS Provides Tips on Determining If It’s Really The IRS At Your Door

The Internal Revenue Service has created a special new page on IRS.gov to help taxpayers determine if a person visiting their home or place of business claiming to be from the IRS is legitimate or an imposter.

With continuing phone scams and in-person scams taking place across the country, the IRS reminds taxpayers that IRS employees do make official, sometimes unannounced, visits to taxpayers as part of their routine casework. Taxpayers should keep in mind the reasons these visits occur and understand how to verify if it is the IRS knocking at their door.

Visits typically fall into three categories:

IRS revenue officers will sometimes make unannounced visits to a taxpayer’s home or place of business to discuss taxes owed or tax returns due. Revenue officers are IRS civil enforcement employees whose role involves education, investigation, and when necessary, appropriate enforcement.

IRS revenue agents will sometimes visit a taxpayer who is being audited. That taxpayer would have first been notified by mail about the audit and set an agreed-upon appointment time with the revenue agent. Also, after mailing an initial appointment letter to a taxpayer, an auditor may call to confirm and discuss items pertaining to the scheduled audit appointment.

IRS criminal investigators may visit a taxpayer’s home or place of business unannounced while conducting an investigation. However, these are federal law enforcement agents, and they will not demand any sort of payment. Criminal investigators also carry law enforcement credentials, including a badge.

For more information, visit “How to know it’s really the IRS calling or knocking on your door” on IRS.gov.

The IRS reminds people who owe taxes – or think they do – to stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more information, visit “Tax Scams and Consumer Alerts” on IRS.gov.


Taxpayers have a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore these rights and the agency’s obligations to protect them on IRS.gov.

Missed the Tax Return Deadline? IRS Offers Help

The tax deadline for most taxpayers was Tuesday, April 18, 2017. The IRS has some advice for taxpayers who missed the filing deadline.  
  • File and pay as soon as possible. Taxpayers who owe federal income tax should file and pay as soon as they can to minimize any penalty and interest charges. For taxpayers due a refund, there is no penalty for filing a late return.
  • Use IRS Free File. Nearly everyone can use IRS Free File to e-file their federal taxes for free. Taxpayers whose income was $64,000 or less can use free brand-name tax software. Those who made more than $64,000 can use Free File Fillable Forms to e-file. This program uses electronic versions of IRS paper forms. Fillable forms work best for those who are used to doing their own taxes. Taxpayers can file -- even if they missed the deadline -- using free options on IRS.gov through the Oct. 16 extension period.
  • File electronically. No matter who prepares a tax return, taxpayers can use IRS e-file through Oct. 16. E-file is the easiest, safest and most accurate way to file a tax return. The IRS will send electronic confirmation when it receives the tax return and issues more than nine out of 10 refunds in less than 21 days.
  • Pay as much as possible. If taxpayers owe but can’t pay in full, they should pay as much as they can when they file their tax return. IRS electronic payment options are the quickest and easiest way to pay taxes. IRS Direct Pay is a free, secure and easy way to pay a balance due directly from a checking or savings account. Pay any owed amounts as soon as possible to minimize penalties and interest.
  • Make monthly payments through an installment agreement. Those who need more time to pay taxes can apply for a direct debit installment agreement through the IRS Online Payment Agreement tool. There’s no need to write and mail a check each month with a direct debit plan. Taxpayers who don’t use the online tool can still apply on Form 9465, Installment Agreement Request. Get the form at IRS.gov/forms.
  • File as soon as possible to get a refund. Taxpayers who are not required to file may still get a refund if they had taxes withheld from wages or they qualified for certain tax credits like the Earned Income Tax Credit. Those who don’t file their return within three years could lose their right to the refund.
Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Additional IRS Resources:

Tuesday, April 18, 2017

What to Do When an IRS Letter Arrives in the Mail

The IRS mails millions of pieces of correspondence every year to taxpayers for a variety of reasons.
Below are some suggestions on how to best handle a letter or notice from the IRS:
  1. Do not panic. Simply responding will take care of most IRS letters and notices.
  2. Most IRS notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and provides specific instructions on what to do. Careful reading is essential.
  3. A notice may likely be about changes to a taxpayers’ account, taxes owed or a payment request. Sometimes a notice may ask for more information about a specific issue or item on a tax return.
  4. If a notice indicates a changed or corrected tax return, review the information and compare it with your original return.
  5. There is usually no need to reply to a notice unless specifically instructed to do so, or to make a payment.
  6. Taxpayers must respond to a notice they do not agree with. Mail a letter explaining why there is a disagreement with the IRS. The address to mail the letter is on the contact stub at the bottom of the notice. Include information and documents for the IRS to consider and allow at least 30 days for a response.
  7. There is no need to call the IRS or make an appointment at a taxpayer assistance center for most notices. If a call seems necessary, use the phone number in the upper right-hand corner of the notice. Be sure to have a copy of the tax return and notice when calling.
  8. Always keep copies of any notices received with tax records.
  9. Be alert for tax scams. The IRS sends letters and notices by mail. IRS does not contact people by email or social media to ask for personal or financial information. The IRS will not demand payment a certain way, such as prepaid debit or credit card. Taxpayers have several payment options for taxes owed.
For more on this topic, visit IRS.gov. Click on the link ‘Respond to a Notice’ at the bottom center of the home page. Also, see Publication 594, The IRS Collection Process. Get IRS.gov/forms at any time.

To make a payment, visit IRS.gov/payments or use the IRS2Go app to make a payment with Direct Pay for free, or by debit or credit card through an approved payment processor for a fee.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Additional IRS Resources:

Helpful Tips to Keep in Mind When Amending Your Tax Return

Taxpayers can fix mistakes or omissions on their tax return by filing an amended tax return. Those who need to amend will find the following tips helpful.
  1. File using paper form. Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct the tax return. Taxpayers can’t file amended returns electronically. They can obtain the form on IRS.gov/forms at any time. Mail the Form 1040X to the address listed in the form’s instructions.
  2. Amend to correct errors. File an amended tax return to correct errors or make changes to an original tax return. For example, taxpayers should amend to change their filing status, or to correct their income, deductions or credits.
  3. Don’t amend for math errors, missing forms. Taxpayers generally don’t need to file an amended return to correct math errors on their original return. The IRS will automatically correct these items. In addition, taxpayers do not need to file an amended return if they forgot to attach tax forms, such as a Form W-2 or a schedule. The IRS will mail a request to the taxpayer, if needed.
  4. File within three-year time limit. Taxpayers usually have three years from the date they filed the original tax return to file Form 1040X to claim a refund. A taxpayer can file it within two years from the date they paid the tax, if that date is later. That means the last day for most people to file a claim for a refund for tax year 2013 is April 18, 2017. See Form 1040X instructions for special rules that may apply. 
  5. Use separate forms for each year. Taxpayers who are amending more than one tax return must file a Form 1040X for each tax year. Mail each year’s Form 1040X in separate envelopes to avoid confusion. Note the tax year of the amended return on the top of the Form 1040X. Check the form’s instructions for where to mail the amended return.
  6. Attach other forms with changes. If a taxpayer uses other IRS forms or schedules to make changes, they need to attach them to the Form 1040X.
  7. Wait to file for corrected refund for tax year 2016. If due a refund from their original tax year 2016 return, taxpayers should wait to get it before filing Form 1040X to claim an additional refund. Amended returns may take up to 16 weeks to process.
  8. Pay additional tax. If the taxpayer will owe more tax, they should file Form 1040X and pay the tax as soon as possible to avoid penalties and interest. Consider using IRS Direct Pay to pay any tax directly from a checking or savings account at no cost.
  9. Track your amended return. Generally, a taxpayer can track the status of their amended tax return three weeks after they file with ‘Where’s My Amended Return?’ It is available in English, Spanish, Chinese, Korean, Vietnamese and Russian. The tool can track the status of an amended return for the current year and up to three years back. If a taxpayer has filed amended returns for multiple years, they can check each year, one at a time.
Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Additional IRS Resources:

IRS Offers Last-Minute Tips for Those Who Haven’t Filed

The federal income tax filing deadline has arrived and the IRS estimates it will receive approximately 12 million 2016 federal income tax returns and nearly 8.4 million extension requests in the final days of the filing season.

For those taxpayers who have yet to file, the IRS offers this advice:
  • E-file The IRS encourages taxpayers to file electronically. E-file vastly reduces tax return errors, as the tax software does the calculations, flags common errors and prompts taxpayers for missing information. Free File partners make their brand-name software products available for free to taxpayers earning $64,000 or less. Taxpayers who earned more may use Free File Fillable Forms. For the first time, taxpayers also can prepare their taxes from their mobile phone or tablet as well as computer. Taxpayers who changed tax software products, either using Free File or other software products, this year may be asked for their Adjusted Gross Income to verify their identity. See Validating Your Electronically Filed Tax Return for details.
  • Refunds The fastest way for taxpayers to get their refund is to e-file and have it electronically deposited into their bank or other financial account. The IRS issues more than nine out of 10 refunds in less than 21 days. Taxpayers waiting to receive their refunds can use the “Where’s My Refund?” tool on IRS.gov or check the status of their refund through the smartphone app, IRS2Go. The “Where’s My Refund?” tool is updated once daily, usually overnight, so there’s no reason to check more than once per day or call the IRS to get information about a refund. Taxpayers can check “Where’s My Refund?” within 24 hours after the IRS has received an e-filed return or four weeks after receipt of a mailed paper return. "Where’s My Refund?" has a tracker that displays progress through three stages: (1) Return Received, (2) Refund Approved and (3) Refund Sent.
  • Payment Options Many taxpayers who owe money often wait until the last minute to file. Taxpayers who owe have many payment options. They can pay online, by phone or with their mobile device using the IRS2Go app. Available payment options include Direct Pay; Electronic Federal Tax Payment System (EFTPS); electronic funds withdrawal; same-day wire; debit or credit card; check or money order; or cash. Some of these options are free; others require a fee.
  • File an Extension Taxpayers who are not ready to file by the deadline should request an extension. An extension gives the taxpayer until Oct. 16 to file but does not extend the time to pay. Interest and penalties will be charged on all taxes not paid by the April 18 filing deadline. Although some people automatically get an extension – such as those in a federally declared disaster area – most people need to request one. One way to get an extension is through Free File on IRS.gov where some partners offer free electronic filing of the extension request. Extensions are free for everyone, regardless of income. Another option for taxpayers is to pay electronically to get an extension. IRS will automatically process an extension when taxpayers select Form 4868 and they are making a full or partial federal tax payment using Direct Pay, Electronic Federal Tax Payment System or a debit or credit card by the April due date. There is no need to file a separate Form 4868 when making an electronic payment and indicating it is for a 4868 or extension. Electronic payment options are available at IRS.gov/payments. Taxpayers can also download, print and file a paper Form 4868 from IRS.gov/forms. The form must be mailed to the IRS with a postmark on or before midnight on April 18. 
  • Penalties and Interest Taxpayers who are thinking of missing the filing deadline because they can’t pay all of the taxes they owe should consider filing and paying what they can to lessen interest and penalties. Penalties for those who owe tax and fail to file either a tax return or an extension request by April 18 can be higher than if they had filed and not paid the taxes they owed. That’s because the failure-to-file penalty is generally 5 percent per month and can be as much as 25 percent of the unpaid tax, depending on how late a taxpayer files. The failure-to-pay penalty, which is the penalty for any taxes not paid by the deadline, is ½ of 1 percent of the unpaid taxes per month. The failure-to-pay penalty continues to accrue on any unpaid tax balance and can be up to 25 percent of the unpaid amount. Taxpayers must also pay interest, currently at the annual rate of 4 percent, compounded daily, on taxes not paid by the filing deadline.
  • Installment Agreements Taxpayers who find they are unable to pay the entire amount of taxes due should consider filing the return and requesting a payment agreement. Most people can set up a payment plan with the IRS online in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement application to set up a short-term payment plan of 120-days or less, or a monthly payment agreement for up to 72 months. With the Online Payment Agreement, no paperwork is required, there is no need to call, write or visit the IRS and qualified taxpayers can avoid the IRS filing a Notice of Federal Tax Lien unless it previously filed one. Alternatively, taxpayers can request a payment agreement by filing Form 9465. This form can be downloaded from IRS.gov and mailed along with a tax return, IRS bill or notice.
No matter how or when they file, taxpayers are reminded to keep a copy of their tax return and all supporting documents.

Monday, April 17, 2017

IRS Reminds Taxpayers of April 18 Tax-Filing Deadline

The Internal Revenue Service has received 103.6 million 2016 individual income tax returns as of April 7 and expects millions more to be filed by the April 18 deadline. Special filing deadline rules apply to members of the military serving in combat zones, those living outside the U.S. and those living in declared disaster areas.

The IRS also expects more than 13 million taxpayers to request a filing extension, giving them six additional months to complete and file their tax return.

Who Needs to File?
Not everyone is required to file a tax return. The requirement to file depends on a person’s income, filing status, age and whether they can be claimed as a dependent on someone else’s return. Anyone not sure whether they need to file a return should see Do I Need to File a Tax Return or refer to Publication 17, Your Federal Income Tax for Individuals, on IRS.gov.

For an estimated one million taxpayers who did not file a 2013 tax return, April 18, 2017, is the last day to file to claim their part of tax refunds totaling more than $1 billion. Taxpayers due a refund must file a return within three years of its due date or the money becomes the property of the U.S. Treasury. There are no late filing penalties if a refund is due.

According to the IRS, the most common reasons people do not file a return who should are: they don’t know how, may not have the documents needed or owe more tax than they can pay. Taxpayers who owe more than they can pay should pay as much as they can by the due date in order to minimize interest and penalties.

Extensions of Time to File
Taxpayers who are not ready to file by the deadline should request an extension of time to file. An extension gives the taxpayer until Oct. 16 to file but does not extend the time to pay. Penalties and interest will be charged on all taxes not paid by the April 18 filing deadline.

There are several ways to do this. The fastest and easiest way to get an extension is through Free File on IRS.gov where some partners offer free electronic filing of the extension request. Extensions are free for everyone, regardless of income. Taxpayers who earn $64,000 or less can return to Free File before Oct. 16 to prepare and e-file their taxes for free

IRS will automatically process an extension of time to file when taxpayers select Form 4868 and they are making a full or partial federal tax payment using IRS Direct Pay, the Electronic Federal Tax Payment System or by paying with a credit or debit card by the April due date. There is no need to file a separate Form 4868 extension request when making an electronic payment and indicating it is for an extension.
Taxpayers also can complete and mail in Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, to get a six-month extension.

Taxpayers Who Can’t Pay
Taxpayers should file by the deadline, even if they can’t pay, or pay as much as possible and ask the IRS about payment options. By filing a tax return, even without full payment, taxpayers will avoid the failure-to-file penalty. This penalty is assessed when the required return is not filed by the due date or extended due date if an extension is requested.

The failure-to-file penalty is generally 5 percent per month and can be as much of 25 percent of the unpaid tax. The penalty for returns filed more than 60 days late can be $205 or 100 percent of the unpaid tax.

The failure-to-pay penalty, which is the penalty for any taxes not paid by the deadline, is ½ of 1 percent of the unpaid taxes per month and can be up to 25 percent of the unpaid amount. Taxpayers must also pay interest on taxes not paid by the filing deadline.


The IRS reminds taxpayers that there is no law that permits taxpayers to refuse to file a federal tax return or refuse to pay their taxes. This includes for reasons based on programs or policies with which they disagree on moral, ethical, religious or other grounds. Taxpayers who file a frivolous tax return can be assessed a $5,000 penalty and civil penalties of up to 75 percent of the underpaid tax. Frivolous tax returns are those tax returns that do not include enough information to figure the correct tax or that contain information clearly showing that the tax reported is substantially incorrect.

Friday, April 14, 2017

Some Taxpayers Get Extensions without Asking; Taxpayers Abroad, in Combat Zones and Disaster Areas Qualify

Even though April 18 is the tax-filing deadline for most people, some taxpayers in special situations qualify for more time without having to ask for it, according to the Internal Revenue Service.
Taxpayers in Presidentially-declared disaster areas, members of the military serving in a combat zone and Americans living and working abroad get extra time to both file their returns and pay any taxes due. Here are details on each of these special tax relief provisions.
Victims of Natural Disasters
Taxpayers in several disaster area localities qualify for more time to file their tax returns and pay any taxes due. Currently, taxpayers in parts of Georgia and Mississippi have until May 31, 2017, to file and pay, while those in parts of Louisiana have until June 30, 2017, to file and pay. These extensions also apply to other tax-related actions, including the deadline for contributing to an individual retirement arrangement (IRA). The IRS automatically provides extensions to anyone living in these areas so there’s no reason for these residents to contact the IRS to request an extension.
The IRS generally provides relief, including postponing filing and payment deadlines, to any area covered by a disaster declaration for individual assistance issued by the Federal Emergency Management Agency (FEMA). Among other things, this relief includes extensions for relief workers, disaster area businesses and anyone whose tax records are located in the disaster area. For details on available relief and information on how to take advantage of it, visit the Around the Nation page on IRS.gov.
Combat Zone Taxpayers
Members of the military and eligible support personnel serving in a combat zone have at least 180 days after they leave the combat zone to file their tax returns and pay any taxes due. This includes those serving in Iraq, Afghanistan and other combat zone localities. A complete list of designated combat zone localities can be found in Publication 3, Armed Forces’ Tax Guide, available on IRS.gov.
Combat zone extensions give affected taxpayers more time for a variety of other tax-related actions, including contributing to an IRA. Various circumstances affect the exact length of the extension available to any given taxpayer. Details, including examples illustrating how these extensions are calculated, can be found in the Extensions of Deadlines section in Publication 3.
Taxpayers Outside the United States
U.S. citizens and resident aliens who live and work outside the U.S. and Puerto Rico have until June 15, 2017, to file their 2016 returns and pay any taxes due. The special June 15 deadline also applies to members of the military, on duty outside the U.S. and Puerto Rico, who do not qualify for the longer combat zone extension. Be sure to attach a statement to the return explaining which of these situations applies. Though taxpayers abroad get more time to pay, interest, currently at the rate of four percent per year, compounded daily, applies to any payment received after April 18. For more information about the special tax rules for U.S. taxpayers abroad, see Publication 54 on IRS.gov.
Everyone Else
Taxpayers who don’t qualify for any of these three special situations can still get more time to file, but they need to ask for it. Automatic extensions give people until Oct. 16, 2017, to file; tax payments are still due April 18, 2017.
An easy way to get the extra time to file is through the Free File link on IRS.gov. In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an extension on Form 4868. To get the extension, taxpayers must estimate their tax liability on this form and pay any amount due.
Another option for taxpayers is to pay electronically and get an extension of time to file. IRS will automatically process an extension when taxpayers select Form 4868 and they are making a full or partial federal tax payment using Direct Pay, Electronic Federal Tax Payment System or a debit or credit card by the April due date. There is no need to file a separate Form 4868 when making an electronic payment and indicating it is for an extension. Electronic payment options are available at IRS.gov/payments.

IRS Reminds Those with Foreign Assets of U.S. Tax Obligations; New Filing Deadline Now Applies to Foreign Account Reports

The Internal Revenue Service today reminded U.S. citizens and resident aliens, including those with dual citizenship, to check if they have a U.S. tax liability and a filing requirement. At the same time, the agency advised anyone with a foreign bank or financial account that a new deadline now applies to reports for these accounts, often referred to as FBARs.

Here is a rundown of key points to keep in mind.

New Deadline for Reporting Foreign Accounts

Starting this year, the deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is now the same as for a federal income tax return. This means that the 2016 FBAR, Form 114, must be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 18, 2017. FinCEN will now grant filers missing the April 18 deadline an automatic extension until Oct. 16, 2017 to file the FBAR. Specific extension requests are not required. In the past, the FBAR deadline was June 30 and no extensions were available.

In general, the filing requirement applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2016. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-Filing System website.

Most People Abroad Need to File

An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income exclusion or the Foreign Tax credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return.

A special extended filing deadline applies to U.S. citizens and resident aliens who live and work abroad. For U.S. citizens and resident aliens whose tax home and abode are outside the United States and Puerto Rico, the income tax filing deadline is June15, 2017. The same applies for those serving in the military outside the U.S. and Puerto Rico. Tax payments are still due on April 18, and interest will apply to any payment received after that date.  See U.S. Citizens and Resident Aliens Abroad for details.

Nonresident aliens who received income from U.S. sources in 2016 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens is April 18. See Taxation of Nonresident Aliens on IRS.gov.

Special Income Tax Return Reporting for Foreign Accounts and Assets

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 complete and attach Schedule B to their tax return. 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.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.

IRS Reporting for Canadian Retirement Accounts

The IRS eliminated a special annual reporting requirement that applied to taxpayers who hold interests in either of two popular Canadian retirement plans. This was part of an IRS change announced in October 2014 making it easier for taxpayers with these plans to get favorable U.S. tax treatment. As a result, many Americans and Canadians with registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) don’t need to file Form 8891 to report details on these plans. This does not affect any other reporting requirements that may apply, such as FinCEN Form 114 and Form 8938.

Specified Domestic Entity Reporting

For tax year 2016, certain domestic corporations, partnerships and trusts that are considered formed for the purpose of holding (directly or indirectly) specified foreign financial assets must file Form 8938 if the total value of those assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year.

For more information on domestic corporations, partnerships and trusts that are specified domestic entities and must file Form 8938, as well as the types of specified foreign financial assets that must be reported, see Who Must File, Specified Domestic Entity, Specified Foreign Financial Assets, Interests in Specified Foreign Financial Assets, and Assets Not Required To Be Reported.

Report in U.S. Dollars

Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

Both Forms 114 and 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.

Expatriate Reporting

Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States during 2016 must file a dual-status alien return, attaching Form 8854, Initial and Annual Expatriation Statement. A copy of the Form 8854 must also be filed with Internal Revenue Service Philadelphia, PA 19255-0049, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.

Choose Free File or E-File

U.S. citizens and resident aliens living abroad can use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $64,000 or less can use brand-name software to prepare their returns and then e-file them for free. A limited number of companies provide software that can accommodate foreign addresses.

A second option, Free File Fillable Forms, the electronic version of IRS paper forms, has no income limit and is best suited to people who are comfortable preparing their own tax return.

Both the e-file and Free File electronic filing options are available until Oct. 16, 2017, for anyone filing a 2016 return. Check out the e-file link on IRS.gov for details on the various electronic filing options. Free File is not available to nonresident aliens required to file a Form 1040NR.

More Information Available

Any U.S. taxpayer here or abroad with tax questions can refer to the International Taxpayers landing page and use the online IRS Tax Map and the International Tax Topic Index to get answers. These online tools group IRS forms, publications and web pages by subject and provide users with a single entry point to find tax information.

Taxpayers who are looking for return preparers abroad should visit the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.

To help avoid delays with tax refunds, taxpayers living abroad should visit the Helpful Tips for Effectively Receiving a Tax Refund for Taxpayers Living Abroad page.


More information on the tax rules that apply to U.S. citizens and resident aliens living abroad can be found in, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, available on IRS.gov.