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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
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Experience:  10 years experience
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I have dual citizenship (USA and Brazil). Currently I paid

Customer Question

I have dual citizenship (USA and Brazil). Currently I paid taxes in Brazil re: my Brazilian assets and I also pay taxes in US regarding my US income.
I would like to learn more about streamlined filling compliance and how can I not double pay taxes in both countries.
I would like to understand fees and penalties associated with it. I understand the 5% fee regarding the highest amount in bank accounts in the past 3 years, but i don't understand the calculation to pay taxes in US that were already paid in Brazil.
The taxes might be regarding bank account, property, and retirement plan. I would like a clear understand of how much do I potentially own.
Submitted: 11 months ago.
Category: Tax
Expert:  Lane replied 11 months ago.

Hi,

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First, the foundation for understanding the US side of this is to understand that all us "tax residents" (this means U.S. Citizens, permanent residents holding green cards, and anyone passing the substantial p[resence for the yax year) must pay income tax to IRS on ALL worldwide income.

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Here's the guidance from IRS on that: https://www.irs.gov/businesses/income-from-abroad-is-taxable

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It's also important to undesrtand that while the US and Brazil do NOT have a tax treaty (the classic tax treaty, which Brazil and US DO have to prevent double taxation, typically declaring that income is only taxed in the counrty of residence for the individual) they DO have an information sharing agreement for sharting information (for the purpose of improving internation tax compliance:

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See this: https://www.treasury.gov/resource-center/tax-policy/treaties/Documents/FATCA-Agreement-Brazil-9-23-2014.pdf

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However, although the starting point on the US return is that you are taxed on EVERYTHING regardless of what Brazil taxes, there are two important tax reliefs give to offset double taxation.

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The Foreign Tax Credit: (FTC) https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit

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And the Foreign Earned Income exclusion (- (FEIE) - which MAY apply, depending on where your EARNED income is actually earned - where you are while earning the income: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

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And of course there is the FATCA reporting (not a tax return) but rather a disclosure that must be made to IRS of accounts held NOT on US soil. (two forms that may apply there are the FinCen114 (FBAR) and the 8938.

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Here's an excellent table that compares the two and shows the criteria for reporting: (as you can see from reading through the table - you may need to report some accounts on BOTH forms):https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements

Expert:  Lane replied 11 months ago.

The only way to truly understand what you'll owe is to prepare the US return (1040 for a tax resident such as yoiurself), apply the credits and exclusions that may be available, (as well as the progressive rates, and personal deductions and exemptions that ALL filers get) to see what you'll owe.

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Please let me know if you have any questions at all.

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If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

Otherwise I’m working for no crediting at all here

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Thank you!

Lane

I hold a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents since 1986.