U.S. citizens and other U.S taxpayers living in Cayman are reminded that the income tax filing deadline for U.S. taxpayers is Monday, June 15. The rules for filing U.S. income, estate, and gift tax returns and paying estimated tax are generally the same for taxpayers living in the United States or abroad, CW Tax Services said in a client notice.
“Your worldwide income is subject to U.S. income tax, regardless of where you reside. Even if all of your foreign income is exempt from U.S. taxation due to the application of the foreign earned income exclusion, you must file a U.S. income tax return in order to claim that exemption,” the tax advisers said.
If the return is filed on or before the June 15 due date, taxpayers who have paid their tax liability in full with or before the filing of the return will not be subject to any penalties for late payment.
Taxpayers living in Cayman who are unable to file their return by June 15, can request an additional extension to October 15 by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, on or before June 15, CW Tax Services said.
However, even with the additional extension penalties for late payment apply and interest is due on any unpaid taxes owed.
Federal law requires U.S. taxpayers to report their 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.
Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2014 must file with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). It is due to the Treasury Department by June 30, 2015, must be filed electronically and is only available online through the BSA E-Filing System website.
These accounts along with certain other foreign financial assets may also have to be reported on IRS Form 8983, Statement of Specified Foreign Financial Assets, if the aggregate value of all such assets exceeds certain thresholds.
Taxpayers who owned an interest in any foreign corporation, partnership, disregarded entity or who were considered as the owner of or a beneficiary of a foreign trust during 2104 may be subject to additional information reporting requirements. Other special reporting requirements apply to taxpayers who owned an interest in any non-US mutual fund or other foreign passive investment corporation at any time during the year.
Nonresident aliens who received income from U.S. sources in 2014 also must determine whether they have a U.S. tax obligation. Unless the nonresident alien earned wages for services that were subject to U.S. employment tax withholding, the filing deadline for nonresident aliens is June 15. A nonresident alien whose only U.S. source income was from sources other than wages and whose full U.S. income tax liability was fully satisfied by U.S. withholding at the source is not required to file a U.S. income tax return, CW Tax Services said.