u.s. expat tax guide – brazil
How can US expats in Brazil catch up on unfiled taxes?
If you haven’t been keeping up with your US tax obligations while living in Brazil, there’s a way to catch up without incurring heavy penalties.
The IRS Streamlined Foreign Offshore Procedure, also known as the Streamlined Tax Amnesty program, allows you to get back into compliance without facing substantial fines.
What steps are needed to use the Streamlined Tax Amnesty Program?
To use the Streamlined program to catch up on your taxes, you will need to follow these steps:
- File Tax Returns for the Last Three Years: You’ll need to file tax returns for the most recent three years. For example, if you apply in 2024, you’ll file returns for 2023, 2022, and 2021. These returns should cover all of your income globally, not just income from the US.
- Submit FBARs for the Past Six Years: If the combined total of all your foreign bank accounts exceeded US$1,000 at any point during the year, you’ll need to report these accounts. The Streamlined program requires you to file FBARs (Foreign Bank Account Reports) for the last six years.
- Provide a Certification Statement: You must also submit a statement explaining why you did not file your taxes in previous years. The statement should clearly demonstrate that the failure to file was unintentional.
Are you eligible for the Streamlined Tax Amnesty Program?
This program is aimed at US taxpayers who unintentionally failed to report foreign income or bank accounts. You may qualify if:
- You are a US citizen, green card holder, or resident who has lived outside the US for at least 330 days during one of the last three years.
- You have unreported income from foreign bank accounts or other foreign sources.
- You can show that your failure to report this income or these accounts was not on purpose.
Which forms do you need for Streamlined Filing?
To file through the Streamlined process, you will need to complete the following forms:
- Form 14653 (Certification Statement): This form is where you confirm that the missed filings were not intentional. You will provide a brief explanation of why you missed reporting and how you eventually became aware of the requirement.
- Form 1040 (Amended Tax Returns): You will need to amend your tax returns for the last three years to include any unreported income, such as earnings from a job, rental income, or investments from outside the US.
- Form 8938 (Foreign Asset Reporting): If your foreign financial assets exceed certain thresholds, you must report them using Form 8938.
- FBAR (FinCEN Form 114): If the total balance across all of your foreign bank accounts was over US$1,000 at any point during the year, you must report those accounts.
- Other Forms (If Necessary):
- Form 3520: This form is needed if you received large gifts from abroad or are involved in a foreign trust.
- Form 5471: Required if you have an interest in a foreign business.
Can you handle the Streamlined Program without help?
While it is possible to complete the Streamlined Tax Amnesty Program on your own, many people find it helpful to work with a tax professional.
If you decide to manage the process yourself, make sure to carefully follow all IRS guidelines and include all necessary information. If you’re uncertain, getting help from a tax expert can make the process much easier.
Why is the Streamlined Program important for Americans living abroad?
The Streamlined program is designed to help you avoid penalties that would normally apply if you missed filing US taxes. Typically, missing tax deadlines results in fines and penalties, particularly if you owe taxes or have not filed the required forms.
These penalties can accumulate rapidly, making the process of catching up quite stressful. The Streamlined Tax Amnesty Program allows you to avoid these penalties and get a fresh start with the IRS.
Even if you’ve missed filing for several years, this program can help you become compliant again. By submitting three years of tax returns and six years of FBARs, you can meet the requirements of US tax law without facing severe financial consequences.
Haven’t filed your US taxes while living in Brazil? The IRS Streamlined Tax Amnesty Program allows you to become compliant without facing substantial fines.
Do you need to include your Brazilian spouse’s income on your US tax return?
Usually, you don’t need to include your Brazilian spouse’s income on your US tax return. If your spouse is not a US citizen, green card holder, or US tax resident, and they haven’t opted to be treated as one, their income isn’t required to be reported on your return.
However, if your spouse chooses to be treated as a US tax resident, you may need to include their income on your tax return.
How do you write the Offshore Certification for Streamlined Filing?
The Offshore Certification is a key part of the Streamlined Filing process. This is a written statement explaining why you missed filing your taxes and confirming that the failure was unintentional.
Make sure you are clear and honest in your explanation, as the IRS uses this document to decide if you qualify for the Streamlined program. If they determine that your failure-to-file was deliberate, you won’t be eligible for the program’s benefits.
How long does the Streamlined Tax Amnesty process take?
The time it takes to complete the Streamlined process depends on how complex your tax situation is. Collecting all the necessary paperwork, filling out the forms, and sending everything to the IRS can take from a few weeks to a few months.
After submission, it may take the IRS several more months to review your documents. It’s important to be patient and to ensure that all your paperwork is complete and correct to avoid delays.
What happens if you owe taxes for previous years?
Even if you owe taxes for past years, the Streamlined program can still be beneficial. Its main advantage is the ability to avoid penalties that come with late filing, which can add up quickly.
You will still need to pay any taxes owed, but skipping the penalties can save you a substantial amount. If you owe a large sum, you may also be able to set up a payment plan with the IRS to pay it over time.
What mistakes should you avoid when using the Streamlined Program?
- Not enough detail in your explanation: Make sure to clearly explain why you didn’t file your taxes. The IRS needs enough context to understand your situation.
- Forgetting required forms: Missing forms can delay your case. Double-check that you’ve included all the necessary paperwork.
- Incorrect or incomplete information: Errors in your information can lead to delays or denial. Double-check your work for accuracy.
- Assuming you don’t qualify: Many people assume they aren’t eligible for the Streamlined program because they’ve been abroad for years. As long as your failure to file was not intentional, you may qualify.
Should you work with a tax professional for streamlined filing?
It’s generally a good idea to work with a tax professional for Streamlined Filing, especially if you’re unsure about the requirements. A professional who specializes in expat taxes can help you determine if you qualify, gather the right paperwork, and ensure all forms are correctly filled out.
Is the Streamlined Program worth it if you haven’t filed taxes in years?
Yes, the Streamlined Program is definitely worth considering if you haven’t filed your US taxes in many years. It allows you to catch up on your taxes without facing penalties that could otherwise be overwhelming.
By submitting three years of back tax returns and six years of FBARs (Foreign Bank Account Reports), you can comply with US tax laws and avoid future problems. This gives you peace of mind, knowing you’re up to date and won’t be hit with surprise penalties or legal issues later.
Aya Takriti, an IRS Enrolled Agent with 11 years of expat tax experience, specializes in US tax preparation, tax planning and tax advice for US citizens and Green Card holders living and working in the Middle East. *Schedule a consultation with Aya today.
*30-minutes US$247.
