An Iowa-Born Professor's American Tax Ordeal in Brazil

“Citizenship-based taxation places US citizens living in the Global South in a dire situation”

-Martin from Iowa and Brazil

Dear Members of Congress

I was born in Iowa City to foreign parents who were finishing their studies in the US, and a month later we moved to Brazil. Our family returned to the US for five years in the 1980s, and I was nine years old when we left the US for good in 1985. Until 1999, my only interaction with the US was for a few hours at a time on the occasional lay-over on international flights. Since 1999 I have not set foot in the US at all. I now live in Brazil, where I work as a university professor and happily pay and declare taxes.

In 2024 I became aware that being born in the US meant I had life-long tax obligations with the US. Afraid of being non-compliant and having trouble with the IRS, I began to try to remedy my situation by hiring a specialized tax-firm to begin a streamlined compliance procedure. And thus began an ordeal that has upended my day-to-day life and has taken a huge emotional toll.

All costs for filing and paying US taxes are in US dollars. However, Brazil is a much cheaper country than the US and the value of the Brazilian Real has plummeted over the past five years. I earn a good salary (for Brazilian standards) but even so filing my US tax returns has so far cost me a quarter of my net 2024 income. What’s more, this is roughly the same amount I paid in income tax in Brazil in 2024. I obviously cannot afford this, so I have been forced to resort to borrowing money and dipping into my savings.

Furthermore, when you have lived your whole life abroad, it is obvious that all financial planning involves managing your money in your country of residence, not the US. However most day-to-day, easy-to-access, Brazilian investments such as mutual and fixed-income funds are very expensive to report, and under-reporting is subject to severe penalties. This has forced me to change how I manage my day-to-day finances, due to routine practices in Brazilian banks that make the tax returns expensive and difficult to file.

Having to declare taxes in the US has also thrown my retirement planning into disarray. I have had to liquidate many of my investments long before maturity since the yearly filing costs would cancel out all earnings. I have no idea how I am going to plan for retirement from hereon in, since almost every form of easy-to-access Brazilian investment is severely punished with high filing costs that must be paid in US dollars.

Citizenship-based taxation places US citizens living in the Global South in a dire situation: we must deal with two taxation regimes and the filing costs are crippling since wages and the purchasing power of local currencies are well below those of the US. Furthermore, we are being unduly punished if we plan our futures by investing in the country where we reside and plan to live the rest of our lives. We are therefore in a unique situation as citizens who must comply with two sets of rules, as well as the pre-emptive financial penalties for investing outside the US, despite not living in the US. The argument that there is no double taxation also falls flat because, as I show above, the filing costs alone can equal, or even exceed, the amount paid in local taxes.

Finally, I cannot underplay the psychological turmoil caused by discovering that a country we have not set foot in for decades might one day come after us for mistakes in our tax filings that it might consider serious tax offences. This emotional distress is compounded by the financial distress caused by having to pay filing costs and taxes in US Dollars despite earning lower wages paid in weaker currencies that often devalue over the years.

The vast majority of US citizens abroad are not rich expats trying to avoid US taxes: we are normal, hard working people trying to get on with our normal lives and we pay our fair share of taxes in our country of residence. Many of us have not had any interaction with the US for most of our lives.

Citizenship-based taxation of US citizens abroad is a cruel and inhumane practice, and I urge you to end this nightmare for all US citizens who live their lives outside the US.

Martín from Iowa and Brazil