From the February issue of Forum
By Marcelo Calvoso, managing partner of Duncan & Associates
If you are a U.S. citizen or resident alien, the rules for filing your U.S. individual income tax return are generally the same whether you live in the United States or abroad. The U.S. Internal Revenue Code requires all Americans, citizens or resident aliens, living in the United States or abroad, to file U.S. income tax returns.
Understanding the filing requirements
If you are a U.S. citizen or resident alien and you live abroad, you are subject to tax on your worldwide income. However, if you meet certain requirements under Section 911 of the Code, you may qualify to exclude a certain amount of your foreign earned income (up to US$91,400 for 2009), plus a certain amount of your qualified foreign housing costs. In addition, Section 901 allows taxpayers to take either a credit or a deduction for foreign income taxes paid.
Although Section 911 has been revised several times, the regulations have consistently required that a Federal individual income tax return be filed even if, due to the use of foreign earned income and housing exclusions or the foreign tax credit, there is no tax liability.
You must also file a return if you owe any other taxes (such as Alternative Minimum Tax), or Self-Employment Tax (if you had net earnings from self-employment of at least US$400)
In addition, even if you do not otherwise have to file a return, you should file one to get a refund of any Federal income tax withheld or other credits.
When to file
The 2009 return is generally due April 15, 2010.
An automatic two-month extension of time to file until June 15, 2010 is granted to file the 2009 return if, on the due date of the return, you live outside the U.S. and Puerto Rico, and your tax home is outside the U.S. and Puerto Rico.
The automatic two-month extension also applies to paying the tax. However, interest is charged on any unpaid tax from the regular due date (April 15, 2010) until it is paid.
Additional extensions of time to file
1) An automatic six-month extension (until October 15, 2010) is granted if you file Form 4868 by the regular due date of the return (April 15, 2010). The same form should be filed by the extended due date of June 15, 2010 to get an additional automatic four-month extension (until October 15, 2010) to the previous two-month extension.
2) In addition to the six-month extension, taxpayers who are outside U.S. can request a discretionary two-month additional extension to file (until December 15, 2010). To request this extension, you must send the IRS a letter by the extended due date of October 15, 2010, explaining the reasons why you need the additional two months.
3) File Form 2350 by April 15, 2010 (or June 15, 2010 if you qualify for the previous automatic two-month extension) to ask for an extension of time to file if you need the time to meet either the bona-fide residence test or the physical presence test in order to qualify for the foreign earned income exclusion and/or foreign housing exclusion.
Keep in mind that unlike the original automatic two-month extension to June 15, none of these additional extensions extend the time to pay your income tax. Instead, they give you extra time to file, but interest will be charged on any unpaid tax from the original due date of the return (April 15, 2010) and late payment penalty from the extended due date of payment (June 15, 2010), until it is paid.
Finally, make sure that you understand and comply with your Brazilian income tax obligations. If you are a Permanent Resident (RNE holder) or hold a Temporary Work Permit, you should file a 2009 Brazilian individual income tax return reporting your worldwide income and declaration of assets. If you moved to Brazil during 2009, a Part-Year return may be required.
The 2009 Brazilian return is due April 30, 2010, and no extension of time to file or pay the tax is available.
In addition, you are also required to file a “Foreign Assets Report” with the Brazilian Central Bank, if on December 31, 2009, you had investments and/or fixed assets outside Brazil with aggregate value of US$100,000 or more. The due date to file this report is yet to be determined.
Marcelo Calvoso, managing partner of Duncan & Associates, in Sao Paulo, specializes in individual income tax preparation and consulting, with long time experience preparing U.S. Federal income tax returns. Contact him at 5572-5411, or mcalvoso@uol.com.br .