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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22643
Experience:  Taxes, Immigration, Labor Relations
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My name isXXXXXm from Brazil, and I had worked for a

Resolved Question:

My name isXXXXX from Brazil, and I had worked for a company in New Jersey as a J1 Trainee. After J1 expired, I came back to Brazil and we have worked on H1 work visa. So, I should go back to USA as soon as it is done.

Meanwhile, I'm working for the same company from Brazil. Company is depositing my payments on my American Citibank account. Every month I transfer this payment to my Brazilian bank account.

I thought this situation would take only a few weeks but we have done this way since January 2013.

So, my questions are:
1. How to pay the alien non resident taxes I should have payed since January 2013?
2. How to start paying this taxes every month?

Thanks,
Eduardo Garcia
Submitted: 11 months ago.
Category: Tax
Expert:  Lev replied 11 months ago.

LEV :

Hi Eduardo and welcome to Just Answer!
1. How to pay the alien non resident taxes I should have payed since January 2013?
Because you are a nonresident alien - you would be taxed ONLY on income from US sources.
There are complex rules how to determine the source of income. You may take a look - page 12 IRS publication 519 - http://www.irs.gov/pub/irs-pdf/p519.pdf - Table 2-1. Summary of Source Rules for Income of Nonresident Aliens.
As we see - the business income for providing personal services is sourced where services are performed - thus, if services are performed in Brazil - that income is NOT from US sources - it is not subject of US income tax - and you personally as a nonresident alien generally is NOT required to file federal income tax return.

LEV :

2. How to start paying this taxes every month?
When your income is taxable in the US - your employer is required to withhold taxes from each paycheck. As long as your employer does't withhold taxes - there is no need to pay anything to the IRS.
However - because you are a resident of Brazil - all your worldwide income is taxable - and income that is paid by your US employer must be reported.

Customer:

That is very interesting. So, just confirming, because I'm working from Brazil, it can be considered that my income (payments that this American company deposit on my bank account on a regular basis) is not from US source? Is that correct? For me, it would be awesome if I could pay/report taxes only to one country (in this case, Brazil).

LEV :

So, just confirming, because I'm working from Brazil, it can be considered that my income (payments that this American company deposit on my bank account on a regular basis) is not from US source?
That is correct. You may take a look at IRS publication 519 which I referenced above.
Because you are a nonresident alien - you would be taxed ONLY on income from US sources. Since that is a compensation for services you provided from outside the US - the compensation you received is NOT income from US sources and as such is NOT taxable in the US.
Your tax liability in Brazil is a separate issue - and is based on local laws.

Customer:

That is very enlightening. Please, allow me sometime to review the references you gave me. Thanks!

LEV :

Sure - take your time.

Customer:

Hi LEV, I reviewed the document you referenced and it is very clear now. Even one example showed very well I shouldn't be taxed in USA. That's the example:


Example 1.

Christina Brooks, a resident of

the Netherlands, worked 240 days for a U.S.

company during the tax year. She received

$80,000 in compensation. None of it was for

fringe benefits. Christina performed services in

the United States for 60 days and performed

services in the Netherlands for 180 days. Using

the time basis for determining the source of

compensation, $20,000 ($80,000 ×

60

240

) is her

U.S. source income

Customer:

In Brazil, you can deduct taxes you paid outside the country. That's why I wanted to make sure.

Customer:

Thanks a lot and have a nice week!

Lev :

Because your compensation is for work done OUTSIDE of the US - it is not taxable in the US. So if any taxes were withheld - you need to file a tax return as a nonresident and ask for the refund.

Customer:

I don't think they are withholding any taxes. In the Contractor agreement, there is this clause: State and Federal Taxes
Client will not:
• withhold FICA (Social Security and Medicare taxes) from Contractor's payments or make FICA payments on
Contractor's behalf
* make state or federal unemployment compensation contributions on Contractor's behalf, or
* withhold state or federal income tax from Contractor's payments.
Contractor shall pay all taxes incurred while performing services under this Agreement--including all applicable income
taxes and, if Contractor is not a corporation, self-employment (Social Security) taxes. Upon demand, Contractor shall
provide Client with proof that such payments have been made.

Customer:

Thanks for your help!

Lev :

In Brazil - you may claim a foreign tax credit - but only for income from foreign sources. If you performed work in Brazil - the compensation is not from foreign sources - and there is no foreign tax credit for such situation.
However - if you work in the US - and that income is taxed in both countries - you may use a foreign tax credit on your Brazil tax return,
See for reference
http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/taxation-international-executives/brazil/pages/income-tax.aspx#14
See also here - right column - http://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/Tax/Taxation%20and%20Investment%20Guides/2013/dttl_tax_highlight_2013_Brazil.pdf

Customer:

Oh, that's more than enough! Thanks! =)

Lev :

If there is no withholding - and you actually paid no US taxes - there is nothing you may claim for teh foreign tax credit in Brazil.
See the first referenced document - The foreign tax credit is allowed for taxes levied in countries with which Brazil has an income tax treaty in effect or for taxes levied by countries whose legislation grants reciprocal treatment to Brazilian-source income and taxes.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22643
Experience: Taxes, Immigration, Labor Relations
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