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How to proper deduct expenses in Brazil when the Florida LLC

is getting paid inside the...
How to proper deduct expenses in Brazil when the Florida LLC is getting paid inside the USA.-The client opened a Florida LLC
-The company will offer aviation consulting with an estimated income of 70k year or less
-He will be paying expenses in Brasil using his personal information ( such as invoices under his name) and also funds will come from him not directly from the LLC in the United StatesQuestions:1. what is the proper way to deduct this incurred expenses in Brazil? Remeber the consulting is done worldwide with companies inside and outside the USA, the Florida LLC will receive the payment inside the USA. Expenses are generated most in Brasil paid from his personal account.2. For accounting purpose; Can he transfer the amount owned on business expenses in Brazil from the Business account to his personal account here in the USA? this amounts can stay in the USA or he needs to reimburse this amounts directly to his account in Brazil?
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Answered in 1 hour by:
10/25/2017
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,331
Experience: Taxes, Immigration, Labor Relations
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If that is a single member LLC - that is disregarded for income tax purposes - all income and expenses are reported on owner's individual tax return - and that would not matter if expenses are paid by the LLC or directly by the owner.
It is also not relevant that expenses are paid abroad - business expenses are the cost of carrying on a trade or business.
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business.

.

Regardless - any expenses must be substantiated - the taxpayer must retain supporting documents to proof all deductible expenses.

When expenses are paid in a foreign currency - they must be converted into USD based on the currency conversion rate at the time of payment.

.

That is for the owner convenience to have a separate business account - it is recommended - but not required.

So how the owner will account for business money and how he will manage business funds - that is up to the owner.

The ISR will only look into accounting when expenses must be proved and that accounting practice is consistent.

Questions?

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Customer reply replied 1 month ago
the onwer will use his personal account to pay for expenses in brasil.And he will reimburse him self in the United States but it will not transfer the money to brasil is that consider legal? Should cause any problems?
Customer reply replied 1 month ago
Meaning the llc will reimburse him here but he will not transfer the money to his original account in brasil.

That is completely up to the owner how to manage his money.

He may use EITHER account simultaneously - and there is nothing illegal as long as these are his funds.

Having two accounts and using them both for business will NOT create any issues with the IRS.

Reimbursements are not required.

That is up to the owner how he wants to structure financial relations between himself and the LLC.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,331
Experience: Taxes, Immigration, Labor Relations
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Customer reply replied 1 month ago
The expense is been generate in brasil
In a different currency would that not be more questionable

On the tax return - all deductions will be reported in USD - you will not report expenses in a different currency.

The only question regarding different currency may come during the audit and if the taxpayer woudl be audited.

But all expenses MUST be converted into USD using the currency conversion rate as on the day the payment was made.

You may use any commonly use published conversion rates - but you will need to use the SAME source for such rates consistently.

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Customer reply replied 1 month ago
Thank you
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Lev
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