If you are an American living abroad, you may have taken advantage of the automatic 6-month tax filing extension by filing Form 4868 by the original due date of your return (April or June 15). If so, now is the time to get moving on your tax return filing. October 17th is just around the corner!

While for most years, the 6-month extension due date is October 15th, since this date falls out on a weekend this year, the extension due date for the 2015 tax return was moved to October 17th.

Filing After the Deadline

Filing after this year’s extended deadline can have a number of adverse and irreversible effects, including:

Trigger of failure-to-file penalty – calculated as 5% of the taxes owed for each month outstanding (capped at 25% of the total tax liability). If tax is owed, then the previously triggered late-payment penalty and interest also continue to accrue.

Forfeiture of tax elections – A number of important elections must be made by the due date of the tax return (including extensions) or they may be lost. Examples include the Section 911 foreign earned income inclusion and the Section 1296 election to mark-to-market PFIC Stock.

For those of you who have successfully completed an IRS delinquency amnesty program (e.g., OVDP or the Streamlined Procedures), filing by the extension deadline is particularly important, because the IRS is most likely going to pay special attention to your file to ensure you stay on track from now on. The IRS will be looking to see that you have filed your tax return and all information returns (e.g., Form 5471, 3520) on time.

October 17 is also the final deadline to fund a qualified retirement account, such as an IRA. In this regard, your tax return must be completed in order to finalize certain tax information that is necessary for determining your contribution limitation.

If it turns out that October 17 does not provide sufficient time to prepare your tax return this year, all is not lost. You may be able to secure a further extension to December 15th. While a further extension will not automatically be granted, our experience has been that the IRS will provide the extra time if a reasonable explanation for the delay is provided.

It is best, of course, to try to avoid this type of situation and instead prepare your tax return in good time.