Saturday, May 11, 2019

TAX ON RENTAL INCOME: PAYING IT and BEING LEGAL IN MEXICO



If you need help with your US taxes on rental income, or your other Mexico income email us at taxmeless@gmail.com or visit our website at www.taxmeless.com.  We are CPAs and attorney with over 30 years experience with Americans living in Mexico and their taxes.

TEMPORARY VISA REQUIRED?  I read an article on the internet about your services.  We have spoken to an accountant in PV about paying taxes on our rental income.  One accountant has told me I need to get my temp visa. This seems like a hassle when I am using the condo only a short time each year.   What is your take on this?
 Ronnie from Puerto Vallarta
Hi Ronnie:  Thanks for your email.  Per Articles 158 and 159 of the Tax Code, a visa, other than a tourist visa when you visit Mexico, is NOT necessary.    As a non-resident you may rent your property and pay taxes in compliance with Mexican law.   Additionally, due to treaties, there is no double taxation and expenses of your property can be deducted in your country of residence
IS RENTING MEXICAN PROPERTY PROHIBITED? I have been told that the standard bank trust wording for foreign individuals does not permit the rental of residential property at all.   How can you offer to pay taxes on income on a prohibited activity?
 Jim from Playa del Carmen
Hi Jim.   The foreign investment law specifically permits the beneficiary (foreigner) to rent, sell, modify their properties and to collect the profits therefrom.      Many trusts state that the bank must pay the taxes but we know that will not happen.   It has been our experience that if the foreigner pays his/her taxes on rental income and has the receipts to prove it there is absolutely no quarrel with Mexican officials.        
OUR PROPERTY TITLE IS IN AN LLC.   HOW CAN WE PAY TAXES ON THE INCOME?
Marilyn from Cozumel
Hi Marilyn.   Thanks for your question!  We will need to have your documents translated and authorizations prepared in the name of the LLC and signed by the legal representative.  With this we can pay your taxes and provide you with receipts which will be accepted by the tax authorities in your country of residence.

IS THE FIDEICOMISO THE PROPERTY DEED? 
 June from Michigan with property in Ixtapa.
Yes, the Fideicomiso to hold property in the restricted zone of Mexico is both a contract with the Mexican bank to hold your title as trustee, and also is the deed to your rights in the property.
WE HAVE HEARD THAT OUR PROPERTY CAN BE SEIZED BY THE GOVERNMENT IF TAXES ARE NOT PAID MONTHLY.   IS THIS TRUE? John from Puerto Penasco
Yes.   Definitely failure to pay taxes on income is a violation of the Mexican law and property can be attached and sold as payment for past due taxes after a procedure similar to that used by the US and Canada tax authorities.  To date the Mexican tax authorities have not aggressively pursued violators but this is changing as they have access to internet and rental promotion programs.
PENALTIES FOR NOT FILING,  FOR NON-PAYMENT:   The penalty for not being enrolled as a taxpayer is 2,740. To 8,230 mxn.    The penalty for not making declarations as required range from 1,100. To 13,720. Mxn  per month in addition to interest at the rate of 1.13% per month on the amount owed.   These penalties are being adjusted upward to compensate for exchange rates, etc.
Mexico has tax treaties with 32 countries,   no double taxation!
PAYING TAX ON YOUR RENTAL INCOME FROM MEXICAN PROPERTIES IS A MUST, WHETHER YOU LIVE IN MEXICO OR NOT.  GET LEGAL and AVOID THE CONSEQUENCES OF TAX EVASION!
FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
info@rentaltaxmexico.com                info@settlement-co.com *
linda.neil@settlement-co.com

Tuesday, February 5, 2019

US Tax Consultations Now Available in Mexico by US Tax Attorney re; real estate, business, investments, tax returns

A "MINI TAX CONSULTATION" IS NOW AVAILABLE with a US Attorney by Phone or SkypeIf you have specific tax questions on your personal situation and need to discuss it with an US expatriate international tax expert, with the protection of  Attorney-Client privilege, you can request a "Mini Consultation."   "Mini Consultation" costs a minimum of $300 US for up to 30 minutes of Mr. Nelson's professional legal tax advice over the phone, skype or by  email from any where in the world.         


  No need to visit his office.  If  you send us an outline of your situation, facts and questions in advance, we prepare in advance and this time is extremely productive and usually resolves all of your questions  within the time allowed. Over 900 U.S. expat taxpayers located everywhere in the world  have used "Mini Consultations" to resolve their tax problems and issues.  US Phone (949) 480-1235. US Fax (949) 606-9627 or we can talk on my skype address dondnelson. Email:ddnelson@gmail.com   Payment can easily be made by credit card, or  paypal, or direct  bank transfer. If your questions or problems are URGENT let us know and we can often schedule it on the same day. Learn More About  How your Mini Consultation Works

Don Nelson, Attorney at Law has ever 30 years experience with US expatriate, international and nonresident taxation and representing taxpayers before the IRS.  He is also a partner in Kauffman Nelson LLP Certified Public Accountants.  Read more about his background and experience.

www.TaxMeLess.com

Monday, January 28, 2019

2018 FAST US TAX FACTS FOR AMERICAN WORKING AND LIVING IN MEXICO- EXPATRIATES AND GREEN CARD HOLDERS



BY Kauffman Nelson LLP CPAS and Don D. Nelson , Attorney,  Charles Kauffman CPA

If you are a US Citizen or green card holder you must file a US tax return every year unless your taxable income is below a certain threshold.  Even if your income is below that threshold, you may still be required to file certain forms to report foreign assets, etc. Failure to file these forms can result in severe IRS penalties.   If you do not itemize your health, tax, interest, charitable and miscellaneous deductions you get a standard deduction of $12,000 if single or filing as married filing separately or $24,000 if you file jointly with your
spouse.

As a US expatriate living and working abroad 4/15/19, your 2018 tax return is automatically extended until 6/17/19  but any taxes due must be paid by 4/15/19 to avoid penalties and interest. The return can be further extended until 10/15/19 if the proper extension form is filed. An even further extension until December may be available if the proper letter is sent to the IRS.

 For 2018 if you are a qualified expatriate you get a foreign earned income exclusion (earnings from wages or self employment) of $104,100, but this exclusion is only available if you file a tax return. You must qualify under one of two tests to take this exclusion: (1) bonafide resident test or (2) physical presence test. You can read more about how to qualify in IRS Publication 54. This exclusion only applies to income taxes and does not apply to US self- employment tax (social security plus medicare).  You spouse who lives and works abroad with you will also be able to use this exclusion against any earned income they have abroad. You can lose this exclusion if you file your return more than 18 months late. The exclusion can only be claimed on filed tax return and does not apply if you fail to file a tax return.

 For 2018 if you qualify for the entire year  for the foreign earned income exclusion  (form 2555) you will be excluded from having to comply with the health insurance rules  (or possible penalties) of Obamacare (ACA). These rules are complex and should be reviewed if you do not qualify for the expat exclusion for the entire year of 2017 because you may have an obligation to purchase health insurance or be penalized.

 If your foreign earnings from wages or self -employment exceed the foreign earned income exclusion you can claim a housing expense for the rent, utilities and maintenance you pay if those amounts that exceed a minimum non-deductible amount.   There is a limit to the housing amount and certain “high-cost” locations there is a higher amount of housing expense which can be considered. (For “high-cost” country limitations see Form 2555 instructions).

  You get credits against your US income tax obligation for foreign income taxes paid to a foreign country but you must file a US tax return to claim these credits. This avoids double taxation of the same income.

  If you own 10% or more of a Foreign corporation or Foreign partnership (LLC) you must file special IRS forms,  or incur substantial penalties which can be greater including criminal prosecution if the IRS discovers you have failed to file these forms.

  If you create a foreign trust or are a beneficiary of a foreign trust you may be obligated to file forms 3520 and /or 3520A each year to report those activities or be subject to severe penalties. Foreign foundations and non-profits which indirectly benefit you may be foreign trusts in the eyes of the IRS.

  Your net self- employment income in a foreign country (earned as an independent contractor or in your own sole proprietorship) is subject to US self -employment tax (medicare and social security) of  15.3% which cannot be reduced or eliminated by the foreign earned income exclusion. The one exception is if you live in one of the very few countries that have a social security agreement with the US and you pay the equivalent of social security in that country.

  Forming the correct type of foreign corporation and making the proper US tax election (to cause the income and foreign taxes  the foreign corporation pays to flow through to your personal US tax return) with the IRS for that corporation may save you significant income taxes and avoid later adverse tax consequences. You need to take investigate this procedure before you actually form that foreign because it can be difficult to make that election later and only certain types of foreign business entities are eligible to make this election..

  If at any time during the tax year your combined highest balances in your foreign bank and financial accounts (when added together) ever equal or exceed $10,000US you must file a FBAR form 114 with the IRS by October 15, 2019 for the 2018 calendar year or incur a penalty of $10,000 or more including criminal prosecution. Foreign financial accounts often include accounts in you sign on for a foreign corporation, foreign partnerships foreign pension plans, stock brokerage accounts, and cash surrender value of foreign life insurance.  This form does not go in with your personal income tax return and can only be filed separately on the web at: http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

  The IRS gets lists of Americans applying or renewing for US passports or entering the country. They will compare these lists with those who are filing US income tax returns and take action against those who do not.

  Often due to foreign tax credits and the foreign earned income tax expats living abroad who file all past year unfiled tax returns end up owing no or very little US taxes. The IRS has several special programs which will help you catch up if you are in arrears which will reduce or possibly eliminate all potential penalties for failing to file the required foreign asset reporting forms. We can direct you to the best program for your situation, prepare the returns and forms and represent you before the IRS.

 Beginning in 2011 a new law went into effect which requires all US Citizens report all of their worldwide financial assets with their personal tax return if in total the value of those assets exceed certain minimum amounts starting at $50,000. Failure to file that form 8938 on time can result in a penalty of $10,000. The form is complex and has different rules that apply to you if you live abroad or live in the US. This form is required in addition to the FBAR form 114.

 Certain types of income of foreign corporations are immediately taxable on the US shareholder's personal income tax return. This is called Subpart F income. The rules are complex and if you own a foreign corporation you need to determine if these rules apply to you when you file the required form 5471 for that corporation. For 2018 a new tax was enacted with the acronym of GILTI tax. This may or may not cause every Controlled Foreign Corporation to owe taxes on the income it does not distribute to its owners. LEARN MORE HERE

  If you own investments in a foreign corporation or own foreign mutual fund shares you may be required to file the IRS form 8621 for owning part of a Passive Foreign Investment Company (PFIC) or incur additional, taxes and penalties for your failure to do so. A PFIC is any foreign corporation that has more than 75% of its gross income from passive income or 50 percent or more of its assets produce or will produce passive income.

There are many more special tax laws too numerous to mention here that apply to expatriates, green card holders and US  taxpayers with foreign assets, businesses, etc. Please consult a tax expert if you have other offshore matters to be certain what is required to be filed.

Download your   2018 US tax return questionnaire prepared expressly for Expatriates HERE. Send us your completed questionnaire and we will immediately provide you with a flat fee quote for preparing your return(s).

Don D. Nelson, US Tax Attorney, Charles Kauffman CPA, Kauffman Nelson, LLP, CPAs
Huntington Beach, California USA
US Phone: (949) 480-1235, US Fax: (949) 606-9627
Email:ddnelson@gmail.com or ustax@hotmail.com
Skype address: dondnelson
Visit our International Tax Blog for the Latest Expat and International Tax Developments at www.usexpatriate.blogspot.com    /   http://us-mexicantax.blogspot.com/

We have been preparing tax returns and assisting US clients located in over 123 countries around the the world for over 35 years. We also assist US Nonresidents meet their US tax obligations and return filing requirements. Email, skype or phone us for immediate assistance.

MINI TAX CONSULTATIONS BY PHONE, SKYPE OR EMAIL: We offer mini consultations (with attorney client privilege) to answer your tax questions and resolve your tax issues.  Email: taxmeless@gmail.com to learn more or request a consultation

For additional useful information and tax assistance go to our website at. www.TaxMeLess.com



Disclaimer and Conditions: The information contained herein is general in nature and is not to be construed or relied on   as tax or legal advice with respect to you individual tax situation or questions. Your use of this material does not create any attorney/CPA relationship between you and this firm or any other obligation. You are advised to retain competent tax professionals help with your individual tax matters and for appropriate answers your specific tax questions.

Friday, January 11, 2019

THE 3% HOSPITALITY TAX AND ITS IMPLICATIONS FOR RESIDENTIAL RENTALS

Many have suggested that the 3% hospitality tax needs to be paid by owners of residential rental properties (single family homes, condominiums) Airbnb is trying to collect it.

Following is an explanation by a Mexican certified public accountant of the tax provided in 2015:: .

The 3% hospitality tax is a local tax, not a federal tax.    If paid by the owner of a home (house or condominium) in Mexico, the tax is being paid  in an improper manner, contrary to the purpose of the tax.

The 3% hospitality tax is not paid by those who handle rental properties (understanding that rental properties is the temporary use or enjoyment of a real property that has a residential dwelling or commercial use.).    Those who pay the hospitality tax are those whose activity is hotels.    The hotel business is a totally commercial and touristic activity. The real properties destined for hotel usage were not designed to be residential dwellings such as the ones non-resident owners have in the Mexican bank trust (fideicomiso).  The local authorities should not request same tax from you since you are not managing hotels.

______________________________________________________________________

As US tax professionals we express no opinion on Mexico's tax structure and suggest you contact a Mexico tax accountant to advise you on your personal situation if you are a rental property owner.


Wednesday, January 9, 2019

Need a Good Mexican Accountant for your Mexico Taxes and Accounting?

We are often asked about referrals to a Mexican Contador/ CPA. The following firm is an excellent choice for your Mexican tax and accounting needs:

LS Accounting & Tax Services SC is a firm located in Cabo San Lucas, BCS Mexico
The owners are USA and Mexico CPA’s with decades of experience, zero language barrier and many proven local contacts.

The services provided range from monthly accounting and tax compliance to banking administration, budgeting, operational reporting, internal control audits, legal representation services, legal domicile services, new business formation, immigration services and legal documentation. The firm provide these services to a wide range of clientele from construction companies, restaurants, hospitality, retail, tourist activities, etc. The firm also  partners with US CPA firms  and Attorneys to provide a streamlined service for their  US tax payer clients and for US nonresidents who wish to do business in the US..

LS Accounting & Tax Services SC
LAT180131E55
Plaza Novva Local #37
Colonia El Tezal
Cabo San Lucas, BCS Mexico
MEX: +52 (624) 128-3700
USA: +1 (949) 436-7737
E: Sarahi0585@icloud.com