WASHINGTON – The Internal Revenue Service today reminded American taxpayers living and working outside the U.S. to file their 2022 federal income tax return by Thursday, June 15. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship.

Qualifying for the June 15 extension
A taxpayer qualifies for the June 15 filing deadline if:

• Both their tax home and abode are outside the United States or Puerto Rico, or
• They are serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return.

Qualifying taxpayers should attach a statement to the return indicating which of these two situations applies.

File to claim benefits
Many taxpayers living outside the U.S. qualify for tax benefits, such as the Foreign Earned Income Exclusion and the Foreign Tax Credit, but they are available only if a U.S. return is filed.

In addition, the IRS encourages families to check out expanded tax benefits, such as the Child Tax Credit, Credit for Other Dependents and Credit for Child and Dependent Care Expenses, and claim them if they qualify. Though taxpayers abroad often qualify, the calculation of these credits differs depending upon whether they lived in the U.S. for more than half of 2022. For more information, see the instructions to Schedule 8812, Credits for Qualifying Children and Other Dependents, and the instructions to Form 2441, Child and Dependent Care Expenses.

Reporting required for foreign accounts and assets
Federal law requires U.S. citizens and resident aliens to report any 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, Interest and Ordinary Dividends, to their Form 1040 series 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.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Specified Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. For details, see the instructions for this form.

Reporting foreign financial accounts to Treasury
Certain foreign financial accounts, such as bank accounts or brokerage accounts, must be reported by electronically filing Form 114, Report of Foreign Bank and Financial Accounts (FBAR), with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).The FBAR requirement applies to anyone with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2022.

The IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is available only through the Bank Secrecy Act E-Filing System. The deadline for filing the annual FBAR was April 15, 2023. However, FinCEN grants those who missed the April deadline an automatic extension until Oct. 15, 2023. There’s no need to request this extension. See FinCEN’s website for further information.

Report in U.S. dollars
Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

Both FINCEN Form 114 and IRS Form 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.

Making tax payments
To ensure tax payments are credited promptly, the IRS urges taxpayers to consider the speed and convenience of paying their U.S. tax obligation electronically. The fastest and easiest way to do that is via their IRS Online Account, IRS Direct Pay and the Electronic Federal Tax Payment System (EFTPS). These and other electronic payment options are available at IRS.gov/Payments.

Reporting for expatriates
Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the U.S. during 2022 must file a dual-status alien tax return and attach Form 8854, Initial and Annual Expatriation Statement. A copy of Form 8854 must also be filed with the IRS by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.

Extensions beyond June 15
Taxpayers who can’t meet the June 15 due date can request an automatic six-month extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The IRS encourages anyone needing the additional time to make their request electronically. Several electronic options are available at IRS.gov/Extensions.

Businesses that need more time must file Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns.

Extensions for military personnel
Members of the military stationed abroad or in a combat zone during tax filing season may qualify for an additional extension of at least 180 days to file and pay taxes. More information, like who qualifies, can be found by reading Extension of Deadline – Combat Zone Service Q&As.

Spouses of individuals who served in a combat zone or contingency operation are generally entitled to the same deadline extensions with some exceptions. Extension details and more military tax information is available in IRS Publication 3, Armed Forces’ Tax Guide.

Other resources:

• A free webinar – Americans Abroad: Tax Obligations and Reporting Requirements – will be available on June 13 to offer more information, including a live Q&A session.
• About Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
• About Publication 519, U.S. Tax Guide for Aliens.

Notice 2023-43 provides guidance on section 305 of the SECURE 2.0 Act of 2022 with respect to the expansion of the Employee Plans Compliance Resolution System (EPCRS). Section 305 expands the Self-Correction Program under EPCRS and requires that Rev. Proc. 2021-30 be revised to take into account the provisions of section 305 no later than two years after the date of enactment of the SECURE 2.0 Act. This notice is intended to assist taxpayers by providing interim guidance in advance of the update to Rev. Proc. 2021-30.

Notice 2023-43 will be in IRB 2023-24, dated June 12, 2023.

Revenue Ruling 2023-11 provides the third quarter interest rates for 2023, including the rates for underpayments and overpayments. The rates for interest determined under Section 6621 of the code for the calendar quarter beginning July 1, 2023, will be 7% for overpayments (6% in the case of a corporation), 7% for underpayments, and 9% for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 4.5%.

Revenue Ruling 2023-11 will be in IRB 2023-23 dated June 5, 2023.

The IRS is accepting applications for the 2024 Internal Revenue Service Advisory Council (IRSAC) through May 31. The IRSAC serves as an advisory body to the IRS commissioner and provides an organized public forum for discussion of relevant tax administration issues between IRS officials and representatives of the public. IRSAC members are appointed to three-year terms by the IRS commissioner and submit a report to the commissioner annually at a public meeting. The IRS is accepting applications for terms that begin in January 2024. More information, including the application form, is available on the IRSAC webpage.

Tax Tip 2023-62

Finding work can be a hard for anybody and certain groups face even bigger challenges. The Work Opportunity Tax Credit is extended through the end of 2025 to help employers that hire workers certified as members of these groups that face barriers to employment:

• People who receive:
  • Long-term family assistance
  • Long-term unemployment
  • Supplemental Nutrition Assistance Program benefits
  • Supplemental Security Income
  • Temporary Assistance for Needy Families
• Formerly incarcerated individuals
• Qualified unemployed veterans, including disabled veterans
• Designated community residents living in Empowerment Zones or Rural Renewal Counties
• People referred to vocational rehabilitation programs
• Summer youth employees living in Empowerment Zones

Certification requirement
To claim the credit, an employer must first get certification that an individual is eligible. To do this, the employer submits IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to their state workforce agency within 28 days after the eligible worker begins work. Employers should not submit this form to the IRS. They should contact their state workforce agency with questions about processing Form 8850.

Figuring and claiming the credit
Eligible businesses claim the Work Opportunity Tax Credit on their federal income tax return. It’s generally based on wages paid to eligible workers during the first year of employment. After the employer receives the Form 8850 certification from the state workforce agency, they can:

• Figure the credit with Form 5884, Work Opportunity Credit
• Claim it on Form 3800, General Business Credit

Special rule for tax-exempt organizations
A special rule allows tax-exempt organizations to claim the credit only for hiring qualified veterans who began work for the organization before 2026. After the employer receives the Form 8850 certification from the state workforce agency, these organizations claim the credit against payroll taxes on Form 5884-C, Work Opportunity Credit for Qualified Tax Exempt Organizations. IRS recommends that qualified tax-exempt employers don’t reduce their required deposits as they wait for the tax credit.

Limitations on the credits
For a taxable business, the credit is limited to the business' income tax liability. Unused credit is subject to the normal carry-back and carry forward rules. For qualified tax-exempt organizations, the credit is limited to the amount of the employer’s share of Social Security tax it owes on wages it paid to qualifying employees.

Upcoming IRS improvements for small business owners

FS-2023-13, May 2023 

As part of National Small Business Week, April 30 to May 6, the Internal Revenue Service wants small business taxpayers to know they will soon see changes to help them better interact with the Internal Revenue Service in ways that work best for them. New improvements to phone service, in-person and online options will allow small business taxpayers get the help they need when they need it.

These improvements are a result of the Inflation Reduction Act (IRA) that passed in August of 2022. The Strategic Operating Plan describes how the agency plans to use funding from IRA to improve customer service and other priorities.

These are some of the enhancements to help small business taxpayers in the near future:

Expanded online service tools

Before next filing season, the IRS will launch Business Online Accounts. This tool is designed with small business taxpayers in mind. Additional features are scheduled to rollout in 2024. As the tool evolves through 2024, small businesses will be able to:

• Use their account to see their tax information, track refunds, and schedule and track payments.
• Access business tax transcripts will also be available online in an easy-to-read format.

Additional ability to respond to notices and file documents online

• The IRS recently launched an online portal for businesses to file Form 1099 series information returns electronically. Businesses used to have to submit these forms by mail.
• later this summer, small business owners will be able to respond to certain notices online like LTR0143C, Signature Missing. The IRS will continue to improve and expand these features.
• By 2024, small business owners will be able to respond to the correction of self-employment income, employment-related identity theft notifications and dozens of other online notices. The IRS will also simplify the language in the notices sent to taxpayers. These notices will have clear instructions on what taxpayers need to do.

Simplified, mobile-friendly forms

• Small business owners who file their own taxes will save time with new simplified tax forms.
• The IRS will modernize tax forms that small businesses most frequently use, including Forms 940, 941 and 944. The updated forms will be streamlined, mobile-friendly and available in multiple languages.

Digitization to eliminate paper-based processes

Improved processing times and faster refunds are on the way as the IRS automates paper-based processes and makes more forms available online. The IRS is expanding its scanning of paper forms to include the most popular forms, Forms 1040 and 941. The IRS is on track to scan millions of returns in 2023, which will save small businesses time and money by speeding up processing and refund delivery.

IR-2023-86: IRS, DOL and HHS issue frequently asked questions about upcoming changes to COVID-19 coverage and payment requirements

WASHINGTON – The Internal Revenue Service, Departments of Labor and Health and Human Services have jointly issued Frequently asked questions, Part 58 and Part 59 to clarify how the COVID-19 coverage and payment requirements under the Families First Coronavirus Response Act (FFCRA), the Coronavirus Aid, Relief and Economic Security Act (CARES Act) will change when the Public Health Emergency (PHE) ends.

Based on current COVID-19 trends, the Department of Health and Human Services is planning for the federal PHE for COVID-19 to end on May 11, 2023. Once the PHE ends, the coverage and payment requirements will change.

Under the FFCRA and the CARES Act, plans and issuers are not required to provide coverage for items and services related to diagnostic testing for COVID-19 that are furnished after the end of the PHE. If they provide such coverage, they may impose cost-sharing requirements, prior authorization or other medical management requirements for the items and services.

Previously issued FAQs are available on the Center for Medicare and Medicaid Fact Sheets & Frequently Asked Questions (FAQs) webpage. 

Revenue Procedure 2023-15 provides a safe harbor method of accounting that taxpayers may use to determine whether expenses to repair, maintain, replace, or improve natural gas transmission and distribution property must be capitalized. To apply this safe harbor method, a taxpayer must first classify its natural gas transmission and distribution property as either linear property (for example, pipe, fittings, and valves) or non-linear property (for example, compressors, regulators, and meters). This revenue procedure then provides methods of accounting for each type of property, specifically, a safe harbor method used for the taxpayer’s linear transmission and distribution property and an optional safe harbor method that the taxpayer may choose to use for its non-linear transmission and distribution property. The revenue procedure also provides procedures for obtaining automatic consent to change to the safe harbor method for linear property and the safe harbor method for non-linear property.

Revenue Procedure 2023-15 will be in IRB: 2023-18, dated 05/01/2023.

IR-2023-83: Reminder: Proposed regulations related to the new clean vehicle critical mineral and battery components go into effect April 18

WASHINGTON — The Internal Revenue Service published proposed regulations today in the Federal Register related to certain requirements that must be met for critical mineral and battery components for the new clean vehicle credit.

The critical mineral and battery component requirements apply to vehicles placed in service on or after April 18, 2023, the day after the Notice of Proposed Rulemaking is published in the Federal Register.

New clean vehicles placed in service on or after April 18, 2023, are subject to the critical mineral and battery component requirements even if the vehicle was ordered or purchased before April 18, 2023.

The Inflation Reduction Act (IRA) allows a maximum credit of $7,500 per vehicle, consisting of $3,750 in the case of a vehicle that meets certain requirements relating to critical minerals and $3,750 in the case of a vehicle that meets certain requirements relating to battery components.

To check if a specific make and model meets the critical mineral and battery components, visit Fuel Economy.gov.

Revenue Ruling 2023-02 confirms that the basis adjustment under section 1014 generally does not apply to the assets of an irrevocable grantor trust not included in the deceased grantor’s gross estate for Federal estate tax purposes. Section 1014 of the Internal Revenue Code does not apply to “step-up” the basis of assets gifted to an irrevocable grantor trust by completed gift in cases in which such assets are not included in the gross estate of the owner of the trust for Federal estate tax purposes. In such cases, even though the grantor trust’s owner is liable for Federal income tax on the trust’s income, the assets of the grantor trust are not considered as acquired or passed from a decedent by bequest, devise, inheritance, or otherwise within the meaning of § 1014(b), and therefore § 1014(a) does not apply.

Revenue Ruling 2023-02 will be in IRB: 2023-16, dated April 17, 2023.