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by: Julia Zhai 2015-08-06
It's something we've all experienced at least once: as soon as you are comfortable and cozy with the way things are, something comes along and upends the order you've come to know so well. This past Wednesday, Congress -- rather stealthily I might add -- stirred the tax pot yet again with the passage of the short-term highway funding extension in H.R. 3236. This bill changes the due dates for FBARs and other foreign asset informational returns. In this article, we will explain the revised due dates and what makes them so difficult to unravel.
For starters, the 2015 tax year (calendar year 2016) due date for 1040s is unchanged – April 15th.
The FBAR due date has been bumped up from June 30th (with no extension) to “April 15 with a maximum extension for a six-month period ending on October 15 and with provision for an extension under rules similar to the rules in Treas. Reg. section 1.6081–5.” While you're losing roughly two-and-a-half months from the original deadline of June 30th, the maximum extension can give you an additional three and a half months to get your FBAR completed and submitted.
First time penalty abatement of FBAR penalties: And, for the first time you are required to file an FBAR (note: not the first time you file an FBAR despite being required for years), “any penalty for failure to timely request for, or file, an extension, may be waived by the Secretary.”
Late FBAR penalties assessment may now be possible: Currently, there are no late FBAR penalties. Instead, there are FBAR penalties for not filing an FBAR or keeping appropriate records.
Not everyone needs to file an extension by April 15th to receive more time to complete a tax return. We look to Treas. Reg. section 1.6081-5 to find out who doesn't have to file on April 15th, without requesting an extension:
§ 1.6081-5 Extensions of time in the case of certain partnerships, corporations and U.S. citizens and residents.
(a) An extension of time for filing returns of income and for paying any tax shown on the return is hereby granted to and including the fifteenth day of the sixth month following the close of the taxable year in the case of—
(1) Partnerships which are required under section 6072(a) to file returns on the fifteenth day of the fourth month following the close of the taxable year of the partnership, and which keep their records and books of account outside the United States and Puerto Rico;
(2) Domestic corporations which transact their business and keep their records and books of account outside the United States and Puerto Rico;
(3) Foreign corporations which maintain an office or place of business within the United States;
(4) Domestic corporations whose principal income is from sources within the possessions of the United States;
(5) United States citizens or residents whose tax homes and abodes, in a real and substantial sense, are outside the United States and Puerto Rico; and
(6) United States citizens and residents in military or naval service on duty, including non-permanent or short-term duty, outside the United States and Puerto Rico.
(b) In order to qualify for the extension under this section—
(1) A statement must be attached to the return showing that the person for whom the return is made is a person described in paragraph (a) of this section; or
(2) If a person described in paragraph (a) of this section requests additional time to file, the person must request the extension on or before the fifteenth day of the sixth month following the close of the taxable year and check the appropriate box on Form 4868, “Application for Automatic Extension of Time To File a U.S. Individual Income Tax Return,” or Form 7004, “Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns,” whichever is applicable, or in any other manner prescribed by the Commissioner.
Based on this text, there are allowable extensions coming in at a maximum of six months. For expats, the theoretical due date should be April 15, but they are given an automatic two-month extension to June 15 (which is still a full 15 days sooner than the previous deadline). They can, however, request another extension to October 15th and even push a possible extension to December 15th! So, which extension applies? We expect clarification, but whenever you are legally required to file your return is when you are required to file an FBAR.
Foreign Superannuation funds (such as those found in Australia, Singapore, or India) are treated by the IRS as foreign trusts and requires Forms 3520 and 3520-A. Both forms are listed on the bill alongside the FBAR due date change, but the due dates for 3520 & 3520-A remain the same - April 15th with a six-month maximum extension (to October 15th).
If you need assistance filling out any of these forms, of if you just realized you have a filing requirement but haven't been filing, contact us. We can help. From tax prep to resolution, we've got you covered.
Attorney Robert V. Hanson collaborated with Julia on this article.