u.s. expat tax guide – brazil
When do US expats in Brazil need to file the FBAR?
If you’re a US expat living in Brazil and you have foreign financial accounts, you may need to file the Foreign Bank Account Report (FBAR). This filing is mandatory if the total highest balance of all your foreign accounts exceeds US$10,000 at any point during the year.
More importantly, FBAR requirements aren’t limited to traditional bank accounts—they also include savings accounts, investment accounts, and even some digital wallets like PayPal if they hold significant funds.
Why is the FBAR important for US expats in Brazil?
Not filing the FBAR when you’re required to can lead to severe penalties, so it’s always a good idea to file if your combined foreign account balances exceed US$10,000, even briefly.
Do you need to file the FBAR if you have multiple accounts?
Yes, you must file the FBAR even if none of your accounts individually exceeds US$10,000 but the combined value of all your foreign accounts does. For example, if you have US$7,000 in one account and US$4,000 in another, your combined total is US$11,000, which means you need to file.
The FBAR covers all your foreign accounts collectively, including those that may have little or no funds if their cumulative balance meets or exceeds the US$10,000 threshold at any time during the year.
How should joint accounts be handled when filing the FBAR?
Joint accounts must be reported on the FBAR if the combined balance of all foreign accounts you own or control exceeds US$10,000. This rule is applicable even if the account is shared with someone else, such as a spouse or a business partner.
Each person with a financial interest in, or signature authority over, the joint account must file their own FBAR. For instance, if you and your spouse jointly own an account in Brazil with a balance of US$12,000, both of you are required to submit an FBAR.
Additionally, if you have signature authority over an account but do not own it—such as managing a company account—you may still need to report it.
How does FATCA affect FBAR requirements?
The Foreign Account Tax Compliance Act (FATCA) is often confused with FBAR, but they serve different purposes.
FATCA is a law that requires foreign financial institutions to report information about accounts held by US citizens to the IRS. This is why your Brazilian bank might ask for your Social Security Number or inquire about your US citizenship status—they are complying with FATCA requirements.
FATCA is focused on forcing foreign banks to share data, whereas the FBAR is your personal responsibility to report your foreign accounts.
What penalties apply if you miss the FBAR filing deadline?
- Non-Willful Penalties: If the IRS determines that your failure to file was due to an unintentional oversight, you may face a penalty of up to US$10,000 per account. However, if you can demonstrate a reasonable cause for not filing, such as being unaware of the requirement, the IRS may waive the penalty.
- Willful Penalties: If the IRS believes you deliberately ignored the requirement to file the FBAR, the penalties are significantly harsher. You could face a penalty of either US$100,000 or 50% of the account balance at the time of the violation—whichever is greater.
- Criminal Penalties: In extreme cases, particularly if the failure to file is deemed willful and connected to other illegal activities, criminal charges can be brought against you. Fines can reach up to US$250,000, and the penalty may include up to five years in prison. If the violation is part of a pattern of illegal activity, the fines increase to US$500,000, and the potential prison term extends up to ten years.
Is it possible to avoid FBAR penalties if you didn’t know about the filing requirement?
Yes, in some cases, penalties can be avoided if you can prove that you were genuinely unaware of the FBAR filing requirement. The IRS may waive penalties if you can show reasonable cause, meaning that your failure to file was due to a justifiable reason and not willful negligence.
How do you file the FBAR, and what are the deadlines?
The FBAR is not filed with your regular tax return. Instead, it must be submitted electronically through the Financial Crimes Enforcement Network (FinCEN) using the BSA E-Filing System. The standard due date for the FBAR is April 15th, but an automatic extension is available until October 15th if you miss the original deadline.
How can a tax professional assist with FBAR compliance?
A tax professional can help ensure that all accounts are reported correctly, assist with gathering the necessary documentation, and advise you on how to stay compliant going forward. They can also help if you need to file late or are facing potential penalties by guiding you through the reasonable cause process or other compliance options like the IRS Streamlined Filing Compliance Procedures, which are designed to help taxpayers who were unaware of their filing obligations.
