U.S. TAX GUIDE IN BRAZIL
What should you do if you haven’t filed US taxes while living in Brazil?
There is a way to catch up on your taxes without facing heavy penalties, and it’s called the Streamlined Foreign Offshore Procedure.
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Also known as the IRS Streamlined Tax Amnesty program, it is designed to help US taxpayers who haven’t been filing their 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’ll need to file the most recent three years of tax returns. For example, if you’re doing this in 2024, you’d file returns for 2023, 2022, and 2021. You’ll need to report all your income from around the world, not just from 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’ll need to report this. The Streamlined program requires you to file FBARs for the last six years.
- Write an Offshore Certification: This is a letter explaining why you didn’t file your taxes before and promising to file them correctly from now on.
Who qualifies for the Streamlined Tax Amnesty Program?
The Streamlined Tax Amnesty Program is for US taxpayers who didn’t realize they had to report foreign income or bank accounts. You can use this program if your mistake was accidental and not on purpose.
To qualify, you need to:
- Be a US citizen, green card holder, or resident who’s 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 didn’t know you needed to report this information.
What forms are required for Streamlined Filing?
- Form 14653: Certification Statement: This is a form where you explain that your mistake in not reporting foreign income or accounts wasn’t done on purpose. You’ll write a brief statement about why you didn’t know you had to report this income and how you found out.
- Form 1040: Amended Tax Returns: You need to update your past tax returns (from the last three years) to include any income you didn’t report before. This could be money you earned from a job, rental property, or investments outside the US.
- Form 8938: Reporting Foreign Assets: If you have a lot of money in foreign accounts or other financial assets, you’ll need to report this on Form 8938. The IRS wants to know about any foreign bank accounts, investments, or other financial assets that go over certain amounts.
- FBAR (FinCEN Form 114): Reporting Foreign Bank Accounts: If you had more than US$10,000 in total in foreign bank accounts at any point during the year, you’ll 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 might need to file this form.
- Form 5471: If you own part of a foreign business, you might need to fill out this form.
- Statement Explaining Your Mistake:: Along with the forms, you’ll need to write a short note explaining why you didn’t know about the rules and how you ended up making the mistake.
Can I file the Streamlined Tax Amnesty program myself?
Yes, you can. But many people find it helpful to get advice from a tax professional. The forms can be tricky, and it’s important to get everything right.
If you want to handle it yourself, just make sure to follow the IRS instructions closely and include all the information they ask for. But if you’re unsure, getting help from a tax expert can make the process smoother and less stressful.
Why is the Streamlined Program helpful?
The best part of the Streamlined program is that it protects you from penalties.
If you didn’t file your taxes on time, the IRS charges penalties for some forms and further penalties if you owe tax, which add up quickly. If you use the Amnesty program, those penalties can be avoided.
It’s like getting a clean slate, you get a start fresh with the IRS without worrying about big fines.
Even if you haven’t filed your US taxes for many years, the Streamlined program can help you get back on track.
However, you’ll need to file three years of tax returns and six years of FBARs before being fully compliant with US tax laws.
Do I need to include my Brazilian spouse and their income on my US tax return?
Not usually, but sometimes it is worth it.
The good news is that 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 the opposite is true, then you will need to include them in your tax return.
