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If you are living overseas, your taxes are much more complicated than domestic taxes in the US. This is why many people who file expat tax in the US end up getting a bill for fines, penalties, and interest that they may not have known existed. If you are filing taxes this year, it’s important that you understand the ways in which you can incur these fines—and avoid them at all costs.
But first, it’s important to understand that expat tax in US is split very broadly into two distinct categories: willful and non-willful violations. Willful violations are when you understand or know the existence of tax expectations and deadlines but still do not comply. Non-willful is the accidental omission of information or claims or the accidental filing of your taxes late or without the proper paperwork. While the latter can come with some severe penalties and fines, sometimes including criminal charges, non-willful violations often come with lesser fines or no fines whatsoever (just an updated return that details what was missing).
That said, no matter what happens, it is always in your best interest to file your expat tax in the US on time and with all of the relevant claims and information. To not do this, whether willfully or accidentally, can result in fines and other issues. Ignorance does not always absolve a guilty party, which is why many expats turn to professional and experienced tax firms that specialize in expat taxes and claims. Doing so can help you stay compliant with your overseas investments and income, and that can help you avoid fines while saving you money.
There are many fines and penalties that can happen with expat taxes in the US. Here are the major ones.
1. Failure to File
The most obvious way to incur penalties and fines for expat tax in the US is to not file your taxes at all. Not filing at all will come with some penalties, including accruing interest on what you owe. But even if you end up owing nothing, you may still be subject to penalties if you do not file your taxes at all. The solution is to file your taxes, simple as that, and it helps to file them before the deadline to avoid any unnecessary attention from IRS auditors.
2. Failure to Pay
Filing is one part of doing your taxes. The other is paying any outstanding debt to the IRS. While many people send a cheque along with their filing, some delay paying and risk penalties as a result. It is always a good idea to file, pay, and sort out anything that will change that afterwards. In most cases, waiting to see if you were correct with your expat tax in the US results in late fees and interest that eliminate any difference that may occur.
3. Being Late
Expat tax in the US already comes with an extended deadline so that those living overseas can sort out their taxes and file them without fear of late penalties. Pushing that deadline essentially invites fines and, in some cases, may trigger an audit. The best way to avoid this is to file on time, which for most expats is June 15th, a full two months after the general April 15th deadline. Getting them in on time will make life easier in general.
If you want to avoid these late fees, plan ahead. Start getting your expat tax in the US together well in advance, at least by the end of the fiscal year, so that you won’t be blindsided by the June deadline. Plus, getting it in on time or earlier means you can spend more time in the summer sun and less time at a desk with a calculator. Another solution is to send your taxes to a professional firm who can sort everything out and help you file before the deadline.
Expat tax in the US is a complicated business that can lead to fines and penalties that many people didn’t even know existed. If you are an expat filing your taxes this season, you will be best served by filing correctly and on time. If you fail to do so, you could end up paying more than you should—and possibly be damaging your credit score in the process.
Experts in expat tax in the US and can help you get your taxes filed correctly, on time, and in compliance with the latest tax laws and requirements. By going with a professional firm, you can actually end up saving money and avoiding those pesky fines and penalties.
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