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Hi Matt,

Since the USA is one of the countries that requires its citizens to pay income taxes based on citizenship and not on residence like most other nations you will forever be required to file an annual income tax return with the IRS, until such time you become ridiculously wealthy and choose to renounce your citizenship and pay the billionaire exit tax.

The short answer is YES you're almost surely going to have to pay taxes here in Brazil. The question is just how much and on what portion of your salary.

This puts you in a delicate tax situation with Brazil because you're a permanent resident and employed you must also file here. It all depends now on what the tax treaties between the USA and Brazil say. I presume that you are working via the internet (distance working) as an employee of an American company, I believe in that case your income might be considered solely US income, but I can't even say that with any degree of certainty. If you're actually dealing with clients, doing physical work here in Brazil then it's probably going to be considered both Brazilian income and US income. You're going to have to file a Brazilian income tax return annually at any rate if your salary is above the exempt level. Either way, Brazilian or US income you will have to report the converted value of your full salary either as your Brazilian income or "world income" and vice versa with the USA. Unfortunately, given Brazil's complex and weighty tax laws you may even end up being taxed twice on the same income and it's my understanding that there is almost nothing that you can do about it.

It's such a complex situation you're really going to have to contact a tax specialist (probably in the USA) that has a lot of experience with Brazil based American clients.

It's my guess that in the end you're going to have to pay Brazilian income taxes on your entire income, which should be less than you'd pay in the US and then the IRS would require you to pay the difference to them. That would be the best case scenario, but don't be surprised if you get stung for the full tax load in both countries, that too is a real possiblity.

  Cheers, 
  William James Woodward – Brazil Animator, Expat-blog Team

I am not a tax lawyer, and stay away from anything that involves taxes. However, in this case:

You earn your salary in the US and pay taxes there. Here in Brazil you need to declare the income made abroad AND the amount of taxes payed in the US. Those are deducted from wh t you make here.

So let's assume you pay 20% (wag) in the US, and in Brazill your income would be taxes 21%, you pay 1%.

Just checked the IRS website

It shows that there is no Tax Treaty between the USA and Brazil. It goes on to state that if there is no treaty then you will have to pay income tax at the normal rate to the IRS.

This kind of reinforces with me the strong possibility you're going to take the hit twice on the same income and have to pay here too.

Dark clouds on the horizon for sure Matt.

Cheers,
James

Thanks for the input all. Considering I'm getting paid US wages they can tax me at 60% and I'll still live like a king here

If you recieve in the US, and just use your bank card, you could just ...... (I guess you can fill in the blanks )

@james

I hear from americans that, even though such a treaty does not exist, they don't get charged twice. I also hear from americans that they do the thing I mention above (fill in the blanks).

In dutch we have a saying that translates into "don't awake a sleeping cat".

Yes, I know what you mean... we say don't wake a sleeping giant.

The US Tax laws are almost as complex as Brazil's are. I'd be very reluctant to do what those filled in blanks tell me to do. The chances are pretty good about getting caught. I don't know what the legal situation is, but I'd think that if the work was actually something like you'd do strictly by computer then there would be a good strong case to be made that it would be strictly US income, taxed there and exempt here, but who knows. Another things is that the tax laws here change on a daily basis.... very scary that!!!

For me, I just look at the fact that the Brazilian government is going to end up getting a fair chunk of it anyway when you spend it!!! 22% on average for food and groceries, up to 80% for some alcoholic beverages, 60% on imported products, taxes built into utilities, and on, and on, and on. Just goes to show the truth of the old saying the ONLY two things that are certain are DEATH and TAXES.

  Cheers, 
  William James Woodward – Brazil Animator, Expat-blog Team

That is exactly my thought. I am paying US taxes, telecommuting, and maintaining direct deposit through my bank in the United States. Whilst I am pumping all my money into the Brazilian economy and government. I probably won't be claiming any income here. Clearly I am obligated to pay taxes in the US because I am on W2 status.

You need to look up former IRS Agent Joe Banister.  Educating Yourself of the United States Code Title 26 Chapter 1, Part 1, Section 1, Individual Income Tax and the same in the Federal Code of Regulations.

Also, have You ever reviewed the Uniform Commercial Code passed soon after the Banking Emergency Act in the 1930s.  This was written so the Federal Reserve Note (Fiat Money) could be traded international. 

What about the OMB #s on all Federal Forms do You know why this is there.  There is the Privacy Act and Paper Reduction Act.  Another IRS Agents on youtube is John Turner and Sherry Jackson.  Where does Our Income Taxes actually go?

Look up the Grace Commission on Wikipedia what it says about our debt.  The IRS says "We have a Self Assessment and Voluntary Compliance Tax System" what does this mean.  Not to mention the many U.S. Supreme Court cases rulings.  Could this be just simple jurisdiction and authority issues. Could placing TX instead of Texas on any Federal Form place You in their jurisdiction? Look up SovereignSociety.com.

In the U.C.C.s you will find the word Chattel used a lot is the governments, turning the people in to chattel and disrespecting their sovereignty as Human Beings?  The real question is which one do You think You are?

Also educate Yourself on the Council of Foreign Relations and who created them?  There is more but this is a great beginning.  for those who want to learn about their responsibilities and the United States Tax Code.

Hi Matt,

What's the final filing date for US tax returns? I guess that you'll still have plenty of time yet to get the straight goods on exactly what your tax situation is and how to deal with filing.

Cheers,
James

Year ending 2013 will be April 15, 2014.

Dan, where in Lexington? I lived there a few years ago.

Lexington is in Central Kentucky.  Everyone should read the laws of the taxes that they think they are liable to pay.  If not then are you paying a tax You are not liable to pay.  QUESTION AUTHORITY EVERY TIME!!!

Where IN Lexington?

I am in the same situation,  a US citizen living here in Brazil, but handling my business through the internet. 

The first question is whether you owe US taxes on your income.  The answer is yes, you are taxed on worldwide income, though you may have the benefit of the foreign residence 100k exclusion, thereby effectively avoiding US income tax (but not FICA tax).

The second question is would Brazil tax you on income you earned while physically here, through the internet with US clients.  I don't know the answer. I would seek a Brazilian tax lawyer for that one.

The third question is, assuming Brazil will be taxing you, do you get a credit against your US taxes, for the Brazilian tax you paid? The answer is yes, notwithstanding the lack of a treaty, according to my accountant.  However, you don't get a credit against FICA tax, only income tax.  So you will be "double taxed" to the extent you pay FICA, which can be substantial if you are self-employed (15%).