IRS Rules for Money Abroad: Complete Guide for Brazilian Immigrants

IRS rules for money abroad are often one of the most confusing aspects of life in the United States for Brazilian immigrants who maintain bank accounts, investments, or business interests back home. The American tax system is not based solely on income earned within the country but rather on worldwide income, which means that the Internal Revenue Service (IRS) expects U.S. residents and citizens to disclose financial assets outside the United States.

Many Brazilian immigrants are surprised to learn that keeping a bank account in São Paulo, holding stocks on B3, or even retaining ownership of a family business in Brazil can trigger specific IRS filing requirements. Understanding these rules is not optional—it is essential to avoid severe penalties, sometimes exceeding $50,000, and to protect financial stability while living abroad.

For decades, Brazilian immigrants have maintained strong financial ties with Brazil. Whether through checking accounts, savings, real estate funds, or family-owned companies, these connections remain part of their identity. However, the U.S. government requires transparency about these assets.

Two of the most important frameworks are FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act). These rules are not the same, but they often overlap. Failing to comply with one or both can result in devastating financial consequences.

Why Most Immigrants Are at Risk

Studies suggest that nearly 89% of Brazilian immigrants in the U.S. are unaware of their obligations to report money abroad. Many assume that if income remains in Brazil and is not transferred to the United States, it does not need to be reported.

This is a dangerous misconception. U.S. law requires disclosure of financial accounts, even if there is no income generated, and even if taxes have already been paid in Brazil. The IRS is less concerned with double taxation (which can often be avoided with tax treaties) and more focused on transparency and compliance.

FBAR vs. FATCA: Two Distinct Frameworks

The FBAR requirement comes from the Bank Secrecy Act and is enforced by the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury. Every U.S. person with an aggregate balance of more than $10,000 across all foreign financial accounts at any point during the year must file FinCEN Form 114 electronically. This threshold is cumulative, which means that having five accounts with $3,000 each still triggers the filing requirement.

FATCA, on the other hand, is an IRS program requiring certain U.S. taxpayers to file Form 8938, Statement of Specified Foreign Financial Assets. The thresholds here are different, depending on whether the taxpayer lives in the U.S. or abroad, and whether they file jointly or individually. For example, a single filer living in the U.S. must file if the total value of foreign assets exceeds $50,000 at year-end or $75,000 at any time during the year. For married taxpayers filing jointly, the threshold doubles.

The key difference is that FBAR focuses on bank accounts, while FATCA includes a broader range of assets such as stocks, bonds, mutual funds, and ownership in foreign entities. Many Brazilian immigrants will need to file both forms.

FBAR: Technical Requirements

The FBAR must be filed electronically through the BSA e-filing system, separate from the regular tax return. No paper form is accepted. Even if no income is generated in the accounts, disclosure is mandatory. The form requires the maximum value of each account during the year, converted into U.S. dollars using the Treasury’s year-end exchange rate. Supporting records must be kept for at least five years, including bank statements and currency conversion documents.

Failure to file FBAR can result in civil penalties of up to $10,000 per non-willful violation. If the IRS determines that the failure was willful, penalties can be as high as the greater of $100,000 or 50% of the account balance per year, plus potential criminal charges. For immigrants who simply did not know about the rule, the “non-willful” classification often applies, but the cost can still be devastating.

FATCA: Statement of Foreign Assets

Form 8938 is filed as part of the annual Form 1040 income tax return. It requires disclosure of all “specified foreign financial assets,” including accounts, stocks, bonds, partnership interests, and even foreign pensions in certain cases. Like FBAR, assets must be reported in U.S. dollars.

One of the challenges for Brazilian immigrants is understanding how to value assets that fluctuate in Brazilian reais. For example, Brazilian mutual funds (fundos de investimento) must be reported at their fair market value at year-end, converted using the IRS official exchange rate. Currency volatility between the real and the dollar often complicates reporting, but accuracy is essential.

Failure to file Form 8938 carries its own penalties, starting at $10,000 and increasing to $50,000 for continued noncompliance. In addition, the IRS may impose accuracy-related penalties equal to 40% of the underpaid tax attributable to undisclosed assets.

Additional Forms for Brazilian Assets

While FBAR and FATCA are the most common, other IRS forms may apply depending on the type of asset.

• Form 3520 must be filed by U.S. persons receiving certain large gifts or inheritances from foreign individuals, or participating in foreign trusts.
• Form 5471 applies to U.S. persons who own a certain percentage of shares in a foreign corporation, such as a family-owned business in Brazil.
• Form 8865 is required for U.S. persons with interests in foreign partnerships.

These forms are highly technical and often require professional guidance. Failure to file them can result in separate, substantial penalties.

Compliance Procedures

The IRS sets strict deadlines for filing. FBAR is due April 15, with an automatic extension to October 15. Form 8938 follows the same deadline as the annual tax return, including extensions. Keeping accurate records is not optional. Under IRC Section 6001, taxpayers must maintain sufficient documentation to prove compliance.

Brazilian immigrants should maintain copies of all bank statements, investment reports, and legal ownership documents. Currency conversion records should also be archived. With audits increasingly focused on international assets, proper recordkeeping is the best defense.

Penalty Structures and Enforcement

The IRS has made foreign compliance a priority since FATCA was enacted in 2010. Through international agreements, including those signed with Brazil, financial institutions are required to share account information with the U.S. government. This means that “hiding” accounts is no longer realistic.

Penalties vary depending on whether noncompliance is deemed willful or non-willful. For FBAR, non-willful penalties can still reach $10,000 per account, per year, while willful violations can wipe out half of the account balance. FATCA penalties range from $10,000 to $50,000, in addition to accuracy-related penalties. The cumulative effect of these fines can bankrupt families who were unaware of the rules.

Voluntary Disclosure and Amnesty Programs

Recognizing that many taxpayers fail to comply out of ignorance rather than intent, the IRS has established voluntary disclosure programs. The Streamlined Filing Compliance Procedures allow eligible taxpayers to catch up on filings with reduced penalties, provided that the failure was non-willful. Brazilian immigrants who realize they have missed filings should act quickly before the IRS contacts them, as voluntary disclosure is generally only available before an audit begins.

Why Professional Guidance Is Essential

For Brazilian immigrants, navigating IRS rules for money abroad requires not only technical knowledge but also cultural and financial context. Brazilian banking practices differ significantly from U.S. standards, and translating account structures into IRS reporting requirements can be daunting.

A financial account in Brazil that seems simple—such as a poupança savings account—may trigger complex reporting rules in the United States. Consulting with a tax professional experienced in cross-border issues is not just recommended, it is often necessary.

Conclusion: A Roadmap for Compliance

IRS rules for money abroad are designed to ensure transparency and prevent tax evasion, but for the average Brazilian immigrant, they often feel overwhelming. By understanding the distinction between FBAR and FATCA, learning which forms apply, and respecting deadlines and reporting thresholds, immigrants can protect themselves from catastrophic penalties.

The path to compliance is not about fear, but about security. By disclosing accounts and assets properly, Brazilian immigrants can continue to maintain financial ties with Brazil while building a stable life in the United States. The rules may be complex, but the risks of ignoring them are far greater. With knowledge, careful recordkeeping, and professional support, compliance is entirely achievable.