U.S. EXPAT TAX GUIDE – BRAZIL
What should you do if you haven’t filed US taxes while living in Brazil?
If you haven’t filed your US taxes while living in Brazil, there is a way to catch up without facing heavy penalties.
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This process is called the Streamlined Foreign Offshore Procedure, also known as the IRS Streamlined Tax Amnesty program. It helps US taxpayers who haven’t been filing taxes get back on track without the fear of penalties.
Here’s what you need to do if you decide to use the Streamlined program:
- File Three Years of Tax Returns: You will need to file the most recent three years of tax returns. For example, if you are doing this in 2024, you would file returns for 2023, 2022, and 2021. You need to report all of your income from around the world, not just the US.
- Submit Six Years of FBARs: If the total value of your foreign bank accounts was more than US$10,000 at any time during the year, you need to report this. The Streamlined program requires you to file FBARs for the last six years.
- Write an Offshore Certification: You will also need to write a statement explaining why you did not file your taxes before and commit to filing them correctly from now on.
Who is eligible to use the Streamlined Tax Amnesty Program?
The Streamlined Tax Amnesty Program is for US taxpayers who didn’t realize they needed to report foreign income or bank accounts.
You can use this program if your mistake was accidental and not intentional. To qualify, you need to:
- Be a US citizen, green card holder, or resident who has been living outside the US for at least 330 days in one of the last three years.
- Have unreported income from foreign sources or foreign bank accounts.
- Be able to show that you did not know you needed to report this information.
What documents do you need for Streamlined Filing?
- Form 14653: Certification Statement: This form is where you explain that your failure to report foreign income or accounts was not done on purpose. You need to write a brief statement about why you did not know you had to report this income and how you found out about the requirement.
- Form 1040: Amended Tax Returns: You need to amend your past tax returns (for the last three years) to include any income you did not report before. This could be money earned from a job, rental property, or investments outside the US.
- Form 8938: Reporting Foreign Assets: If you have significant amounts of money in foreign accounts or other financial assets, you need to report them on Form 8938. The IRS requires information on foreign bank accounts, investments, or other financial assets over a certain value.
- FBAR (FinCEN Form 114): Reporting Foreign Bank Accounts: If you had more than US$10,000 in total across foreign bank accounts at any point during the year, you need to report these accounts.
- Additional Forms (If Needed):
- Form 3520: If you received large gifts from someone outside the US or are involved with a foreign trust, you may need to file this form.
- Form 5471: If you own part of a foreign business, this form may be required.
Can you complete the Streamlined Tax Amnesty Program on your own?
Yes, you can file the Streamlined Tax Amnesty Program yourself, but many people find it helpful to get advice from a tax professional.
The forms can be complex, and it is important to get everything right. If you decide to handle it yourself, make sure to follow the IRS instructions closely and include all the required information.
If you’re unsure, getting help from a tax expert can make the process smoother and less stressful.
Why is the Streamlined Program useful for people living abroad?
The Streamlined program is useful because it allows you to avoid penalties. If you did not file your taxes on time, the IRS usually charges penalties for some forms and even further penalties if you owe tax, which can add up quickly.
By using the Amnesty program, you can avoid these penalties. It gives you a fresh start with the IRS without having to worry about large fines.
Even if you haven’t filed US taxes for many years, the Streamlined program can help you get back on track. You will need to file three years of tax returns and six years of FBARs to be fully compliant with US tax laws.
Do you need to report your Brazilian spouse’s income on your US tax return?
Not usually, but there are some situations where it could be beneficial. If your spouse is not a US person, meaning they are not a US citizen, green card holder, or US tax resident, and they haven’t chosen to be treated as one for tax purposes, you do not need to include them or their income on your US tax return.
However, if your spouse decides to be treated as a US resident for tax purposes, then you may need to include their income on your tax return.
What should you know about writing the Offshore Certification?
The Offshore Certification is an important part of the Streamlined Filing process. This document is where you explain why you did not file your taxes on time and certify that your failure was not done intentionally.
It is important to be honest and thorough in this statement, as the IRS will review it to determine if you qualify for the Streamlined program.
If the IRS believes your failure to file was intentional, you may not qualify for the amnesty program.
How much time does the Streamlined Tax Amnesty process take?
The time it takes to complete the Streamlined process depends on how complicated your tax situation is.
Gathering all the required documents, completing the forms, and submitting everything to the IRS can take anywhere from a few weeks to several months.
Once your forms are submitted, the IRS may take additional time—often several months—to review them. It is important to be patient and make sure all your paperwork is accurate to avoid delays.
What if you owe taxes for previous years?
Even if you owe taxes for previous years, the Streamlined program can still help. The key benefit is that you can avoid penalties for not filing on time, which can be quite significant.
You will still need to pay any taxes owed, but avoiding penalties can save you a lot of money. Additionally, if you owe a large amount, the IRS may be willing to set up a payment plan so you can pay over time.
What are some common mistakes to avoid when filing under the Streamlined Program?
- Not Providing Enough Detail: The IRS needs to understand why you didn’t file your taxes. Make sure your explanation is clear and includes enough detail.
- Missing Forms: Forgetting to include all the required forms can delay the process. Double-check that you have completed all necessary documents.
- Incorrect Information: Providing incorrect or incomplete information can lead to your application being denied or delayed. Take your time to ensure everything is accurate.
- Assuming You Don’t Qualify: Some people think they don’t qualify for the Streamlined program because they have lived abroad for many years. As long as your failure to file was not intentional, you may still qualify.
Should you get help from a tax professional for Streamlined Filing?
Yes, getting help from a tax professional is a good idea before you start the Streamlined Filing process. A tax professional who specializes in US expat taxes can help you determine if you qualify, assist in gathering the right documents, and make sure all forms are filled out correctly.
This can save you time and reduce the stress of dealing with complicated paperwork. While it is possible to handle it yourself, having professional guidance increases the chances that everything will go smoothly and be accepted by the IRS.
Is the Streamlined Program worth it if you haven’t filed for years?
Yes, the Streamlined Program is definitely worth it if you haven’t filed your US taxes for many years. It provides a way to catch up without penalties, which can otherwise be extremely high.
By filing three years of back tax returns and six years of FBARs, you can become compliant with US tax laws and avoid further issues with the IRS. This means you can have peace of mind knowing you are up to date and won’t face surprise fines or legal problems in the future.
Why partner with a specialist Expat accountant?
Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in Germany. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.
