Instructions for Paying Your US Tax Liability While Living Overseas
The majority of US Expats are able to completely eliminate US tax liability after taking advantage of all the exclusions and deductions available to those living and working overseas. There are times, though, when there is still some tax liability. If you are a US Expat who owes taxes to the IRS, here are the steps to take to make the proper payment(s).
Paying with bank account
If you have a US bank account, you are able to transfer funds from your bank account to the IRS. To pay using your bank account, go to: http://www.irs.gov/Payments/Direct-Pay.
Then take the following steps:
- Click the option ‘Make Payment’
- Choose ‘Balance Due’ under Reason for payment.
- Apply payment to 'Income Tax - Form 1040'
- Choose your tax year for payment - this is the tax year you are making a payment towards. Remember that you are filing for the previous year, so your tax liability in 2015 will be for tax year 2014.
- Verify your identity…Be sure to enter your information exactly as you have entered it on your US expat tax return. If the information on the site doesn’t match the information on your return, your payment will be rejected.
- Enter your payment information… Use a whole dollar amount only rounded up or down to the nearest dollar and enter your bank information as it appears on your bank statements.
Credit Card Payment
If you don’t have a US bank account, you will be able to make a payment using your credit card. Keep in mind that this is a ‘convenience’ offered by the IRS, so there are additional charges in processing your credit card payment.
To take advantage of this option, visit http://www.irs.gov/uac/Pay-Taxes-by-Credit-or-Debit-Card and take the following steps:
- Choose your preferred credit card processing site. You may choose any site you like, but PayUSATax.com is the recommended site; and that’s the site on which these instructions are based.
- Click on the option ‘Make a Personal Payment’.
- Select your payment type…Choose the option ‘Pay your 1040 Balance Due Current Tax Year.
- Enter your location, which is the host country you entered on your tax return.
- Enter the payment amount you wish to send to the IRS. Your personal information must be entered exactly as it’s entered on your US expat tax return.
- Enter your credit card information.
Estimated Tax Payment
If you are making a payment towards estimated taxes, select 'Estimated Tax' as your reason for payment and the tax year you will be paying towards. Unlike payment towards a prior tax year, estimated payments are for the future, so you are likely paying towards the current year.
As a rule of thumb, if you owed tax last year, you should make estimated payments of 110% of your prior year tax due to avoid underpayment penalties.
Wire transaction from foreign bank
If you don't have U.S. bank account and you don't have a credit card then the last option is wire transaction from the foreign bank to the IRS: https://www.irs.gov/individuals/international-taxpayers/foreign-electronic-payments
You are going to want to pay special attention to the address you listed on your US expat tax return. If you made any abbreviations on your return to make it fit in the lines, be sure to use the same abbreviations on your electronic payment.