Taxpayers living abroad receive an automatic extension until June 15, 2024 to send in their 2023 income tax returns. This due date can be extended to October 15, 2024 if a request form is filed. Finally, it’s possible to send a letter to the IRS asking for a second and final extension to December 16, 2024.

However, if tax is due it must be paid by April 15, 2024 in order to avoid interest charges. You may make a prepayment by April 15th and only file your tax return by the extended due date.

The Report of Foreign Bank and Financial Accounts (FBAR) must be electronically filed by October 15, 2024. There can be severe penalties for late filing of the FBAR so it’s very important that it be filed on time.

The IRS has become much stricter about when and how tax returns must be sent from abroad to be considered as timely filed.

American citizens and green card holders are taxed on their worldwide income, regardless of where they live or where their income is derived. Whether or not an American taxpayer actually needs to file depends on their level of income and filing status, such as single, married filing jointly, head of household, etc.

For tax year 2023, the income threshold is only $5 if you are Married Filing Separately, $13,850 for a Single filer, $20,800 for a taxpayer who files as Head of Household and $27,700 for Married Filing Jointly status. These amounts increase for taxpayers who are 65 or older.

Unlike Switzerland, the IRS filing requirements are based strictly on income and not age. Thus, turning 18 does not automatically oblige a child to begin filing a tax return. However, earning income or having ownership of or access to foreign financial accounts may also cause someone below the age of 18 to be obliged to file a tax return or FBAR.

Americans and green card holders who have foreign (non-US) bank or financial accounts with an aggregate value of $10,000 or more at any time during the year must file an FBAR to declare their ownership over the accounts. Generally, all bank accounts, securities accounts and 3rd Pillar accounts must be declared. These accounts must be declared even if you own them jointly or only have signatory authority over them. The rules are complex and penalties for non-compliance are severe, beginning at $10,000 per year.

Even if your income from employment is below the exclusion amount of $120,000 for 2023, you must still file a tax return if your total earnings are greater than the income thresholds mentioned above. It is also important to keep in mind that the exclusion applies only to earned income. This means that income from pensions and social security, for example, does not qualify for the exclusion.

The treaty has provisions in place to ensure that taxpayers will not pay tax twice on the same income. However, that does not mean that if you pay Swiss tax on your income you will never pay US tax. For example, if someone pays income tax at a 15% rate in Switzerland and that same income would be taxed at 20% in the US, the difference of 5% will still have to be paid to the US.

If you or members of your family own or have an ownership interest in a foreign company (such as an AG or GmbH), you may be required to file a Form 5471 Information Return and be taxed on income from the foreign company. Failure to file the form can result in a penalty of $10,000 per year.

If you received a gift or inheritance from a Swiss or other foreign person (non-US citizen or Green-Card holder) or a distribution from a foreign trust of $100,000 or more, you must file Form 3520 Report of Receipt of a Foreign Gift. The amount received is not taxed, but it must be declared. The penalties for failure to file Form 3520 are severe – up to 25% of the amount of the gift or inheritance.

If you are a US taxpayer, you should not own non-US mutual funds, such as Investment fonds, LUX, ETF, SICAV, etc. Under US tax rules such an investment is called a PFIC (Passive Foreign Investment Company). PFICs are subject to a punitive high tax on specially-calculated income and capital gains. Each PFIC you own must be declared separately in a detailed Form 8621 Information Report.

Cashing a US Treasury check in Switzerland:

If you received an Economic Impact Payment in the form of a paper check issued by the United States Treasury, we know that some Swiss banks may refuse to accept these checks. Some clients have succeeded in depositing them when they insist with their bank. Unfortunately, we are not aware of any other solutions for depositing US paper checks in Switzerland.

Don't endorse the check in favor of someone else.

Special US banking rules apply to checks issued by the United States Treasury. Exceptionally, it is not possible for the person to whom the check is payable (payee) to endorse the back of the check in favor of someone else, in order for that person to deposit the check into their US account. US banks are not permitted to accept such endorsed checks.

Benefit from the payment through your 2021 US Tax Return.

If you qualify for the Economic Impact Payment, but have not yet received your check(s), or are unable to deposit your check(s), you may claim the Recovery Rebate Credit on your 2021 Federal Income Tax Return. The Economic Impact Payments issued in 2021 may be offset against any US tax owing in 2021. This credit serves as a dollar-for-dollar reduction of your US tax liability.