AFSA NEWS Earned Income Exclusion (FEIE) on their federal tax return may qualify to extend their return beyond the Oct. 15 deadline using Form 2350 (instead of Form 4868). An extension to Dec. 15, 2025, may be available to certain overseas taxpayers who filed a Form 4868 but are unable to meet the Oct. 15 deadline due to certain qualifying circumstances. Taxpayers impacted by federally declared natural disasters may qualify for further extensions. Readers can review IRS filing extensions due to natural diasters at https://www.irs.gov/ newsroom/tax-relief-in-disaster-situations. States also offer tax filing extensions for natural disasters, so readers should review state-specific extension information as well. We recommend that you consult with a qualified tax professional before availing yourself of these additional extensions. Taxpayers who take advantage of a federal extension must also check their state filing deadlines to avoid inadvertently missing them, because many states do not conform to the same federal extensions or extension deadlines. Although the IRS should not charge interest or late payment penalties for returns filed under the June 16 automatic deadline, they often do. The taxpayer generally must call the IRS to have the interest or late penalties removed. For returns extended beyond June 16, however, the extension granted to the taxpayer is an extension to file but not an extension to pay. As such, the IRS will charge late payment penalties and interest for payments made after the April 15 deadline. Most states will likewise charge late payment penalties and interest for tax payments made after the state’s initial tax filing deadline. Minor Revisions to the 2024 Draft Form 1040 As has been the case for decades, U.S. taxpayers must report “all income from whatever source derived” on IRS Form 1040, which has been revised again this year. This article discusses the most recent draft of IRS Form 1040 (posted in July 2024), along with the multiple accompanying schedules withvarying draft revision dates. Please note that the form may change before the final 2024 Form 1040 and its schedules are approved. Adjustments, deductions, and credits remain matters of “legislative grace,” so it is important to understand those statutes, regulations, forms, and instructions when you claim a credit or deduction. Form 1040: There are no significant changes to the 2024 draft Form 1040. Schedule 1: Report additional income and adjustments, such as tax refunds or credits; alimony received for certain divorces (discussed on page 66); unincorporated or singlemember LLC business income or loss (see Schedule C); rental real estate, royalties, or other pass-through business income (see Schedule E); unemployment compensation; FEIE income; student loan interest deduction; one-half deduction for selfemployment taxes; and educator expenses. The draft Schedule 1 includes a new line to report digital assets received as ordinary income not reported elsewhere. Schedule 2: Report additional taxes such as the alternative minimum tax, self-employment tax, and household employment taxes. The draft Schedule 2 includes new lines to report the repayment of clean vehicle credits, if required. Schedule 3: Claim credits such as the foreign tax credit, credit for child and dependent care, and education credits. The lettered schedules, commonly A through E, remain as follows: (A) Itemized deductions (e.g., medical and dental expenses, deductible taxes and interest paid, gifts to charity, casualty losses from a federally declared disaster). Taxpayers should generally file Schedule A only if their itemized deductions are higher than the standard deduction for the tax year. However, readers should evaluate the total federal and state taxes due when deciding between itemized deductions or the standard deduction. (B) Interest, dividends, and foreign accounts and trusts. (C) Profit or loss from business (sole proprietors and single-member LLCs). (D) Capital gains and losses (e.g., investment sales and certain capital gains from the sale of certain realty and virtual currency investments). (E) Supplemental income and loss from rental real estate, royalties, partnerships, S corporations, estates, and trusts. Many other lettered schedules and incentive-specific forms (e.g., Form 8283 Noncash Charitable Contributions, Form 8889 Health Savings Accounts, Form 8938 Specified Foreign Financial Assets) and corresponding worksheets may be necessary. All are available from the IRS, most with corresponding product pages and instructions. AFSA recommends that members review the IRS Form 1040 information webpage, “About Form 1040, U.S. Individual Income Tax Return”; the Form 1040 Instructions; Publication 17, “Your Federal Income Tax”; and this year’s IRS Nationwide Income Tax Forums Online. THE FOREIGN SERVICE JOURNAL | JANUARY-FEBRUARY 2025 59
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