We get more mail:
I was thinking of taking a trip to Belize in mid-April to fish. My accountant told me that if I’m out of the country on April 17th, I get a two-month extension on my taxes and I find that hard to believe.
It’s true: If you are outside of the United States on April 17th, you get an automatic two-month extension until June 15th; you need to note this on your tax return (filed by June 15th). You will owe interest but there are no penalties. Note that if you have a state tax return, not all states follow this automatic extension.
I worked in Australia last year, and my employer naturally withheld Australian income tax on my income. I can’t believe I have to pay US income tax, too.
It’s true: The United States is one of the few countries that taxes its citizens on their world-wide income. However, there is a tax credit available for your foreign income that has already been taxed. It’s taken on Form 1116. In essence, you will pay the higher of the two countries’ tax rates. Note that the required calculations do get somewhat complex, so you may want to discuss this with your own tax professional.
My father-in-law just passed away, and my husband this month [March 2012] received his bank account in a London bank. Is there anything I need to do for our 2011 taxes?
First, my condolences on your loss.
Assuming you and your husband had no foreign financial accounts in 2011, there won’t be anything related to this that you need to do for your 2011 returns. However, you will have a foreign financial account that may need to be reported for your 2012 tax returns. This involves filing a Foreign Bank Account Report (FBAR, Form TD F 90-22.1) which is filed separately from your tax return, disclosing the foreign account on Schedule B, and possibly filing Form 8938. The requirements depend on balances in the accounts, and the penalties are ridiculous if you make even a minor mistake. I strongly advise you seek a tax professional for this situation. You do have some time for this as it appears this will be a 2012 tax return issue (reported in 2013).
That’s it for our mailbag for this tax season.