US and Mexico Taxes for Americans Living in Mexico. If you have a fideicomiso, Mexican corporation, a foreign bank account in Mexico, or live in Mexico this blog will have data you need about the required forms 5471, 3520, 3520A, FBAR 114, 926, 8865, 2555, 1116, etc., which you may have to file if you live and work in Mexico.
The United States has entered into its second bilateral exchange of financial and tax information agreements regarding the implementation of FATCA with Mexico. This new agreementd targets non-compliant U.S. taxpayers owning foreign accounts.The agreement will be become on January 1, 2013. The reciprocal nature of the United States' agreement with Mexico will allow the countries to use the automatic exchange of information to discover non-compliant taxpayers. The good old days of "what happens in Mexico, stays in Mexico" are almost gone. Because the Mexican Hacienda expects to use this agreement to collect taxes from Mexicans hiding their US financial activities in the US from the Mexican tax authorities, both Mexico and the US will benefit.
Now is the time to start reporting to the IRS all of your previously unreported Mexican business and financial activities before this new program is geared up. If later the IRS discovers you have unreported income or assets in Mexico, and you have not been filing the proper reporting forms with your tax return, it most certainly will impose high monetary penalties and will most likely also seek criminal penalties. The average prison sentence for tax evasion usually runs 3-4 years.