Tax Deadlines Approaching
Guidance on Waiver for FEIE

Hi Everyone –

We hope everyone is healthy and staying safe. As a reminder the following due dates are fast approaching. If you contact us now, we can file an extension for you, but will not be able to address your return until this summer. We will need to know if you want an extension by April 8th. Please keep in mind that an extension is an extension to file the tax return not to pay the tax due.

April 18

Individuals – File a 2021 Form 1040 and pay any tax due. If you want an automatic 6-month extension of time to file the return, file Form 4868 and pay what you estimate you owe.

Individuals – If you’re not paying your income tax for the year through withholding (or won’t pay in enough tax that way). Use Form 1040-ES and pay the first installment of your 2022 estimated tax.

Individuals – Last date for individuals to make traditional/SEP IRA and Health Savings Account contributions and designate as applicable deductions for the 2021 tax year.

Individuals – Gift tax returns are also due. If you gifted more than $15k during 2021 to anyone then you may have a gift tax filing requirement. This is automatically extended with your individual return. File form 8892 if you’ve already filed your individual return to request an extension of the gift tax return.

Trusts – File a 2021 Form 1041 and pay any tax due. If you want an automatic 5.5-month extension of time to file the return, file Form 7004 and pay what you estimate you owe.

Corporations – File a 2021 calendar year income tax return (Form 1120) and pay any tax due. If you want an automatic 6-month extension of time to file the return, file Form 7004 and deposit what you estimate you owe in taxes.

June 15

Individuals – If you’re not paying your income tax for the year through withholding (or won’t pay in enough tax that way). Use Form 1040-ES and pay the second installment of your 2022 estimated tax.

Individuals Abroad on April 18th – File a 2021 Form 1040 and pay any tax due. If you want an automatic 5-month extension of time to file the return, file Form 4868 and pay what you estimate you owe.

Waiver of Time Requirement Released

The remainder of this newsletter will focus on our international clients abroad, and the update just issued by the IRS for impacts of adverse conditions on one’s ability to meet the foreign earned income exclusion.

The IRS has released a Revenue Procedure that outlines guidance for those that had to leave their overseas post early due to civil unrest. This Revenue Procedure is VERY TAXPAYER FRIENDLY and should result in a number of clients qualifying for a partial foreign earned income exclusion. If you are also claiming foreign tax credits, this may or may not beneficially impact your tax return.

2021 DEPARTURES FROM CERTAIN FOREIGN COUNTRIES DUE TO ADVERSE CONDITIONS (Rev. Proc. 2022-18)

On March 28, 2022, the U.S. Internal Revenue Service released Revenue Procedure 2022-18 which provides a waiver for the time requirements for individuals electing to exclude their foreign earned income who must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country.

Country Date of Departure On or After
Iraq January 19, 2021
Burma March 30, 2021
Chad April 17, 2021
Afghanistan April 27, 2021
Ethiopia November 5, 2021

WHY THIS MATTERS

Individuals who would otherwise qualify for the foreign earned income and housing exclusions, may lose the benefit of these exclusions if they leave a country prior to fulfilling the time requirements, which could affect the amount of tax assessed.

A special exception to the time requirements to qualify for these exclusions is allowed for individuals who are forced to leave countries designated by the IRS due to war, civil unrest, or other adverse conditions. To qualify for relief an individual must have established residency, or have been physically present, in the foreign country on or before the applicable dates specified above.

EXAMPLE

Under this revenue procedure, an individual who was present in Afghanistan on January 1 through August 15, 2021, establishes that they reasonably expected to work in Afghanistan for the entire calendar year (for example a contract), but departed Afghanistan on August 15, 2021, due to civil unrest, would be a qualified individual for 2021 with respect to the period January 1 through August 15, 2021, assuming the individual has met the other requirements for qualification under section 911.

NEXT STEPS

Please contact us with any questions and to discuss your facts. Remember, you would need to have been able to qualify for the foreign earned income exclusion if not for the civil unrest events taking place. It is still important to have your days overseas documented with passport stamps, flight itineraries, employment contracts, LOAs, etc. We are expecting increased scrutiny from the IRS for these specific claims and refunds filed under this provision so retaining documentation will be critically important.