As an accountant with over 10 years experiences accounting for US Expats and non-resident aliens based in the UK, we are expert in advising about all matters surrounding US tax.
This article is aimed to break down the US tax rates, penalties and interest US Expats and non-resident aliens should be aware of.
Each year, the IRS increases the income limits for the different rates of income tax. This increase is to account for changes in inflation in correlation with similar incomes, which have only risen by the rate of inflation.
The US Tax deadline for 2019 is April 15th, 2019 (you may be able to claim an extension for this). If you do not pay the tax due by this date, the interest is 3% the federal short-term rate- charged on unpaid tax.
If you file or pay late, there are two key penalties to be aware of.
· The penalty is 5% of the tax owed for each month (or part month) until you file
· This is capped at 5 months
· If your return is over 60 days late, there is a minimum penalty, the less of $210 or 100% of the tax owed
Paying your taxes late:
· The penalty is 0.5% of the tax owed for each month (or part month) until all the tax has been paid
· The penalty is capped at 25% of the tax due
· If the IRS issues a notice of intent to levy, you have 10 days to pay the tax due, after that point the penalty increases to 1%
· If the return is filed on time and you arrange an instalment agreement with the IRS the penalty decreases to 0.25%
You can appeal against the penalties if you have reasonable cause and not due to willful neglect.