Tax Reporting Guidance for Resident Alien with Foreign Self-Employment Income

[hapo1313]

Hello,

This is my first year filing taxes in the U.S., and I’m finding it challenging to determine the correct process. My current situation is as follows:

• I am a resident alien who lived in the U.S. for 185 days in 2024, spending the rest of the year in Brazil.
• My income is entirely from self-employment in Brazil, and I do not have any U.S.-sourced income.
• I also pay taxes on my earnings in Brazil.

How should I report this income on my U.S. tax return? Is it considered regular self-employment income for tax purposes, even though it originates from Brazil? Additionally, how do I claim (if I can claim it) deductions or credits for the taxes and expenses I have already paid in Brazil?

I appreciate any guidance you can provide.

Thank you!

[Vanessa A]

It depends.  Are you a US Resident based on the Substantial Presence Test, or the Green card Test?  Do you plan to terminate your US Residency status or are you returning to the US?  Is your home country Brazil?

If you are a US Resident based on the Green Card Test or you ARE planning to return to the US this year or be a permanent US Resident, then yes, you would report this in the self-employment income section like regular self-employment. This would apply if it was like a temporary assignment. "If you are a self-employed U.S. citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad"  Page 15 Pub 54

 However, The Self-Employment Taxes which consist of Social Security and Medicare taxes would fall under the US Brazil Totalization Agreement.  You would only pay and be covered by one country or the other, so if you are paying social security type taxes in Brazil, you would not need to pay them in the US or vice versa.  According to the US- Brazil Totalization agreement, "Self-employed workers who reside in the United States are assigned U.S. coverage. Self-employed workers who reside in Brazil are assigned Brazilian coverage."  So where you live will determine where you pay SS taxes.  However, you must request an exemption from US Social Security Contributions in order to not pay them if you are maintaining US Residency status. 

If you were simply in the US for 185 days and worked here and are returning home to Brazil, then you could file as a Dual Status Resident.  This would mean, you file a 1040 form for the time you were a US Resident, which if you only lived in the US for 185 days total, that would only be 2 days.  If you did not earn any income during those 2 days, you would not have any reporting requirements as a US Resident.


Taxation of dual-status individuals

However, if you earned money during the prior 183 days and do not have a green card and do plan to terminate your residency status when you left to go to Brazil, then you would need to file a 1040 NR which TurboTax does not support, however, our partner Sprintax.com does. 

@hapo1313 (Edited 23/25 @ 8:13AM)

[hapo1313]

Thanks for the reply!

I have a Green Card, which is why I have stayed more than 183 days as I was told is a rule to keep the green card. But I still don't have a job in the USA, which is why I keep working in Brazil for now. Does this mean I have US residency based on a green card test, correct? Which I should follow the same self-employed as you stated? 

And if that is correct, the social security exemption would not be available, right? As I intend to keep living in the USA (even though at this beginning I am still working in Brazil for half the year).

Thanks!

[Vanessa A]

Yes, if you have a Green Card, you are a US Resident for tax purposes as long as you have the Green Card.

Since you are residing in Brazil while doing the work, due to not having a job in the US, and Brazil is taxing your income for Old-Age benefits, then you would NOT need to pay "Old Age" Benefit taxes to the US on this income.   You will report your income under foreign income and exclusion, NOT under the regular self-employment section. You pay these taxes to the country where you reside which for you right now is Brazil. However, since you are a residing in Brazil, paying into the Brazilian system and self-employed for now, you will need to request an exemption and attach to your US return.  

It is possible to remain covered under the US social security, however, this only applies when you are sent to work temporarily in a foreign country.  Since you have not worked in the US, your situation would not be necessarily be temporary.

When it comes time to retire, you would still be able to collect the benefits from Brazil even though you may be living in the US.  As long as you are living and working in Brazil, you will need to attach the copy of certificate of coverage to your US return every year.  This also means you will likely need to print and mail your return as you may not be able to attach that certificate to your return. 

Employers and self-employed workers must request a certificate of coverage to establish an exemption...

APSAIBH - Social Security Agency Attendance of International Agreements - Belo Horizonte Av. Amazona...
Belo Horizonte - MG - CEP: 30180-001
BRAZIL

Please provide the following information:

• Worker's full name (including maiden name);
• Worker's date of birth;
• Worker's place of birth;
• Worker's country of citizenship;
• Worker's country of permanent residence;
• Worker’s U.S. Social Security number;
• Brazilian Individual Taxpayer Registration (CPF) or your Brazilian Worker’s Identification Number (N...
• Date of hire, if employed;
• Country of hire, if employed;
• Nature of self-employment activity, if applicable;
• Name and address of the employer in the United States and the Agreement country (if self-employed, a...
• Date of transfer and anticipated date of return of employment or self-employment in the Agreement co...
• U.S. employers should retain certificates of coverage in case of an audit by the IRS. Employers shou...

Self-employed workers should attach a copy of the certificate of coverage to their U.S. tax return e...
 

@hapo1313 (Edited 2/3/2025 @ 8:11AM PST)

[hapo1313]

I have tried doing that but the forms said I do not qualify for that as I have spent less than 330 days in Brazil. I have spent 170 Days in Brazil and 196 Days in the USA. Is that still considered as residing in Brazil?

[DaveF1006]

It depends. Based on the information you have presented, you don't have a filing requirement because you have no US income to report since you weren't a US resident at the last day of the tax year and have no intentions on returning. Since all your income is earned in Brazil, you have no US income to report i n2024.

If you do plan on returning to the US however, I would suggest to  file this return as a US resident in the manner that Vanessa A suggests in her previous post because you do qualify as a US resident under the terms of the substantial presense test because you spent more than 183 days in the US in 2024.

@hapo1313