Avoid the Heat: Summer Filing Season Reminders for International Taxpayers

Summer may bring vacations for taxpayers and preparers, but it doesn’t stop international tax obligations. With the April tax season in the rearview, the extended filing period becomes critical — especially for foreign taxpayers. Below are key reminders and common missteps to watch for during the summer filing season.

Don’t Delay on Missed FBAR Filings

If you’ve missed out on the April 15 deadline to submit FinCEN Form 114, there is no immediate need to panic. Any delinquent Foreign Bank and Financial Accounts (FBAR) filings are automatically extended to October 15. However, this extension should not be mistaken for a reason for delay—gathering accurate foreign account information can be time-consuming and waiting until the fall often leads to rushed filings, oversight, or missed accounts that may trigger steep penalties.

It’s best to treat the summer months as a key window to:

• Gather foreign financial assets,
• Confirm account balances, and
• Ensure your FBAR is complete and ready well before the final deadline.

Easily Overlooked Filing Requirements

It’s a common misconception that taxpayers with no balance due are exempt from, or face reduced, international filing obligations. In reality, several international filings are strictly informational and mandatory, regardless of whether any tax is due. The IRS still imposes significant penalties for noncompliance.

Common forms that carry significant penalties if missed:

• FBAR
• Form 8938: Statement of Specified Foreign Financial Assets
• Form 5471: Information Return of U.S. Persons with Respect to Certain Foreign Corporations
• Form 3520: Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts

GILTI and Subpart F Income Reporting Challenges

For U.S. shareholders of Controlled Foreign Corporations, summer often becomes a critical period to finalize calculations of Global Intangible Low-Taxed Income (GILTI) and Subpart F inclusions. Because foreign financial statements may arrive late, taxpayers and preparers are frequently pressed for time to compute these amounts before extended filing deadlines accurately. Mistakes or delays can result in inaccurate tax reporting, potential double taxation, or missed opportunities for credits and deductions.

To avoid errors and not miss foreign tax credits:

• Begin collecting necessary documents early
• Run preliminary calculations over the summer

Taking advantage of the summer months to collect information and review preliminary calculations can help avoid costly errors and penalties.

Summer Travel Complications

Traveling for business or for pleasure during the summer months can complicate eligibility for the Foreign Earned Income exclusion due to time abroad and residency tests. Both the bona fide residence test and the physical presence test require careful tracking of days spent inside and outside the United States. Even a few days of unexpected travel can disrupt qualification.

Crucial steps to stay compliant include:

• Maintain detailed travel records of all dates and locations
• Keep detailed records of time spent abroad
• Understand the nuances of the bona fide residence and physical presence tests

Taking these steps helps ensure that you don’t inadvertently lose valuable tax benefits. Proper documentation and timely planning can make all the difference in successfully claiming the exclusion.

Final Thoughts

The summer filing season is a critical time for international taxpayers to stay proactive and avoid unnecessary complications. Whether it’s catching up on FBAR filings, accurately reporting GILTI and Subpart F income, or carefully tracking time abroad, early preparation is key. Use the summer months wisely to gather information, review your filings, and ensure compliance; doing so can save you stress and costly mistakes down the road.

Reach out to McGuire Sponsel’s Global Business Services team to learn how we can support your firm and your clients in navigating international tax filings with clarity and confidence.