married may 2016 didn't really think about FBAR and taxes..

[isaac124 1]

Hello,
I'm a US citizen who married a Brazilian in May, 2016. I filed my taxes under the married filing separately category for the 2016 tax season because it was my understanding that her earnings (in brazil only) in 2016 couldn't be taxed because she only spent 3 months in the USA using her tourist VISA. So she never filed a 2016 tax return. In 2017, she finally moved here as a permanent resident on October 27th. Whether or not she would pass a significant presence test for 2017, I am under the impression that she will need to file 2017 taxes for her Brazilian earnings. So I think we can file under married filing jointly? What documents do I need to have from Brazil when doing my 2017 tax return?

How do we minimize taxes and avoid being double taxed by both Brazil and the USA?

Also my wife still has accounts in Brazil containing an aggregate amount of cash in excess of the $10,000 threshold which requires us to file the FBAR. 
Was I wrong to not to file the FBAR for the 2016 tax season since I did marry her in the middle of 2016? What should I do? As far as i can tell, my wife wouldn't qualify as a "US person" for 2016 since she didn't spend a long period of time in the USA and only lived here using her tourist Visa.

After filing the FBAR, are we safe to transfer money between Brazil and the USA, avoid paying any taxes, and only pay bank fees? What about buying USD from friends in brazil, then bringing amounts less than $10,000 by plane? 

How about paying brz reals to friends in brazil then letting them deposit USD to my account in the USA? we are talking about sums below $2000 at a time and less than $10,000 aggregate over the course of a single year. We like to buy currency from friends as brazilian friends often need some brazilian currency and we can get an exchange rate that is more fair.

Thanks for any help you can provide,
Isaac

[Italian_in_NYC 259]

If you file MFS in 2016, she is good for FBARs (she wasn't subject to the requirement as she was a NRA for tax purposes).

You do not have to file MFJ this year, you can still file MFS if more convenient. She may not have a filing requirement in the US if she had not enough income after she entered on a green card (or IV).

She will have to file FBAR for 2017 as she was a US person at year-end.

Depending on the amounts, it might be convenient to file MFJ for the whole year. Declare her Brazilian-sourced income and take foreign tax credit.

File separately the State return (no FTC at state level).

Or go to 2555 route-partial FEIE (be careful with the tax home issue).

I forgot. Do not play games with bank accounts, not worth it. Just file the FBAR.

[isaac124 1]

Thanks for that first reply. I'm a little confused about the fgts.. do any Brazilians know if fgts money is supposed to go on the fbar? When my wife withdraws the fgts money in 2019, she shouldn't need to pay taxes anywhere.. but until 2019 it isn't really counted as one of her accounts. So I'm just worried when we file an fbar later with the increase in funds from the fgts, this will somehow result in suspicion of taxable income..

Edited July 10, 2018 by isaac124

[Wuozopo 4,285]

On 1/8/2018 at 11:13 AM, isaac124 said:

After filing the FBAR, are we safe to transfer money between Brazil and the USA, avoid paying any taxes, and only pay bank fees? What about buying USD from friends in brazil, then bringing amounts less than $10,000 by plane? 

How about paying brz reals to friends in brazil then letting them deposit USD to my account in the USA? we are talking about sums below $2000 at a time and less than $10,000 aggregate over the course of a single year. We like to buy currency from friends as brazilian friends often need some brazilian currency and we can get an exchange rate that is more fair.

Thanks for any help you can provide,
Isaac

 

I think you are misunderstanding FBAR and transferring money to the US. 

 

If she is living in the US as a resident in 2018, then the Treasury wants to know about money in foreign accounts the sum of which exceeds $10,000. They want to know by April 2019.  If you don't know what counts, then google "IRS FBAR" and find an IRS.gov page explaining what counts. 

 

FBAR has no relation to filing a tax return other than they are due at the same time of year. It is merely a report identifying financial accounts, address of where held, account number, highest  balance in 2018. There is no tax involved. They just want to know if you have foreign accounts. It's a report. Even if you zeroed out the account before the end of 2018, there was money at some point in 2018 so it is reported. 

 

Transferring your foreign money to the US has nothing to do with income tax. It is not income, but likely money that has been saved up over a number of years. You don't need to think up schemes. Simply transfer the money using a reputable service. We use Transferwise. All the reporting of foreign money entering the US will be done for you by the bank that receives it. They are required to do that. That is just a report so the US can better track money laundering or funding of terrorism activities by foreign sources. It isn't reported to the IRS. It doesn't  matter if it's $100,000 unless you are a money launderer and don't want to be caught, which I don't think you are.

 

The only time you are responsible for filling out a report form is if you bring more than $10,000 in cash in your pocket. There is no institution to do the automatic reporting for you so it is up to you. And that would be stupid to carry that much cash. 

 

Ok, so what is income that gets reported to IRS and maybe taxed? 

Money earned from a job anywhere in the world during 2018 if filing a joint return. It is reported but there are ways to exclude it or get credit for taxes you already paid the other country.

 

Interest earned during 2018 anywhere in the world if filing a joint return.

 

Money earned if say you worked over the Internet at your old job in the foreign country. You pay the country where you live once you become a "US person". You no longer pay taxes to the foreign government even if a foreign company is paying your wages. That is an over simplified explanation and it depends on the specific tax treaty in place between that country and the US, but you get the concept.

 

So in a simplified summary example.

-I do work remotely for my employer in the UK while resident here in the US. That is earned income and the IRS wants me to pay income tax on my 2018 earnings.

-i have a bank account in the UK and earn $12 in interest while living in the US. That is unearned income and I add it to my tax return just like I do interest from my US bank account.

-I have $150,000 in a UK bank. I tell the Treasury Department about it. They do not tax it.

-I move $50,000 to the US using a transfer company. I do nothing. I do not file the report. I do not put it on my incorm tax return.

 

Edited July 19, 2018 by Wuozopo

[isaac124 1]

1 hour ago, Wuozopo said:

 

I think you are misunderstanding FBAR and transferring money to the US. 

 

If she is living in the US as a resident in 2018, then the Treasury wants to know about money in foreign accounts the sum of which exceeds $10,000. They want to know by April 2019.  If you don't know what counts, then google "IRS FBAR" and find an IRS.gov page explaining what counts. 

 

FBAR has no relation to filing a tax return other than they are due at the same time of year. It is merely a report identifying financial accounts, address of where held, account number, highest  balance in 2018. There is no tax involved. They just want to know if you have foreign accounts. It's a report. Even if you zeroed out the account before the end of 2018, there was money at some point in 2018 so it is reported. 

 

Transferring your foreign money to the US has nothing to do with income tax. It is not income, but likely money that has been saved up over a number of years. You don't need to think up schemes. Simply transfer the money using a reputable service. We use Transferwise. All the reporting of foreign money entering the US will be done for you by the bank that receives it. They are required to do that. That is just a report so the US can better track money laundering or funding of terrorism activities by foreign sources. It isn't reported to the IRS. It doesn't  matter if it's $100,000 unless you are a money launderer and don't want to be caught, which I don't think you are.

 

The only time you are responsible for filling out a report form is if you bring more than $10,000 in cash in your pocket. There is no institution to do the automatic reporting for you so it is up to you. And that would be stupid to carry that much cash. 

 

Ok, so what is income that gets reported to IRS and maybe taxed? 

Money earned from a job anywhere in the world during 2018 if filing a joint return. It is reported but there are ways to exclude it or get credit for taxes you already paid the other country.

 

Interest earned during 2018 anywhere in the world if filing a joint return.

 

Money earned if say you worked over the Internet at your old job in the foreign country. You pay the country where you live once you become a "US person". You no longer pay taxes to the foreign government even if a foreign company is paying your wages. That is an over simplified explanation and it depends on the specific tax treaty in place between that country and the US, but you get the concept.

 

So in a simplified summary example.

-I do work remotely for my employer in the UK while resident here in the US. That is earned income and the IRS wants me to pay income tax on my 2018 earnings.

-i have a bank account in the UK and earn $12 in interest while living in the US. That is unearned income and I add it to my tax return just like I do interest from my US bank account.

-I have $150,000 in a UK bank. I tell the Treasury Department about it. They do not tax it.

-I move $50,000 to the US using a transfer company. I do nothing. I do not file the report. I do not put it on my incorm tax return.

 

The FBAR is reported every year right?

My only question remaining is about FGTS.. this is sort of like a form of social security. Brazilians are required to pay a certain portion of their wages every year into an FGTS, that money just sits there until such a time as the brazilian is unemployed for 3 years at which time they may get that money. (If they are fired from a job, apparently they can get the FGTS money faster. I don't know why...)

my wife's FGTS has brz real in an amount which is over usd$10,000 but she insists that the FGTS isn't an account and it does not have an account number or bank associated with it. So It does not need to be reported on the FBAR correct?

[p-ana 933]

23 minutes ago, isaac124 said:

The FBAR is reported every year right?

My only question remaining is about FGTS.. this is sort of like a form of social security. Brazilians are required to pay a certain portion of their wages every year into an FGTS, that money just sits there until such a time as the brazilian is unemployed for 3 years at which time they may get that money. (If they are fired from a job, apparently they can get the FGTS money faster. I don't know why...)

my wife's FGTS has brz real in an amount which is over usd$10,000 but she insists that the FGTS isn't an account and it does not have an account number or bank associated with it. So It does not need to be reported on the FBAR correct?

She is right when she says the fgts money is not in a bank account so if she didn’t withdraw it yet, it should not count for fbar

[Wuozopo 4,285]

1 hour ago, isaac124 said:

The FBAR is reported every year right?

My only question remaining is about FGTS.. this is sort of like a form of social security. Brazilians are required to pay a certain portion of their wages every year into an FGTS, that money just sits there until such a time as the brazilian is unemployed for 3 years at which time they may get that money. (If they are fired from a job, apparently they can get the FGTS money faster. I don't know why...)

my wife's FGTS has brz real in an amount which is over usd$10,000 but she insists that the FGTS isn't an account and it does not have an account number or bank associated with it. So It does not need to be reported on the FBAR correct?

You didn't do what I suggested

  If you don't know what counts, then google "IRS FBAR" and find an IRS.gov page explaining what counts.

 

The first non-advert IRS.gov page has an answer. 

Types of Foreign Assets and Whether They are Reportable

 

Do your homework and find your answer straight from the IRS. I can't spoon feed every answer. 

[isaac124 1]

I'd like to report that I looked a 4th time, though I looked several times... even before you pointed it out the first time, So i feel slighted when you say I didn't do what you said... which I did

 

The best course of action if something does not make sense about the FBAR according to IRS.gov is to contact their email FBARquestions@irs.gov

 

Thanks all and have a good night, good day, good year.. whatever

[Wuozopo 4,285]

20 minutes ago, isaac124 said:

I'd like to report that I looked a 4th time, though I looked several times... even before you pointed it out the first time, So i feel slighted when you say I didn't do what you said... which I did

 

The best course of action if something does not make sense about the FBAR according to IRS.gov is to contact their email FBARquestions@irs.gov

 

Thanks all and have a good night, good day, good year.. whatever

I was extremely busy yesterday but had found it so easily before, I thought you could too.

 

See last thing on this page https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements