When to Include your Mexican and Other Financial Assets on Form 8938 and FBAR forms

The IRS has released a chart giving some guidance on  what you need to include in  the FBAR form (TDF 90-22.1) and what types of assets are included in the new 2011 form 8938.  The best course of action is always to  include a financial asset in the appropriate form(s) even if the IRS is not clear what should be included. CLICK HERE TO GO TO THE IRS CHART ON 8938 AND FBAR  items to be included or excluded.

US Bank Interest Earned by Mexican Citizens Will Be Reported to Mexico

The new IRS rules could result in massive losses to banks along the US-Mexico border. The regulation requires US banks to report details of interest paid to Mexican Citizens (who are not US taxpayers) holding personal accounts even though such interest is not subject to US income taxes. According to an IRS statement, this is aimed at helping their countries of residence fight tax evasion.  US banks along the border feel that some Mexican clients will transfer their accounts elsewhere to avoid the Mexican tax agency from learning of about their funds.

Many banks in the US-Mexico border rely  on deposits and investments from nonresident Mexican citizens to provide the funds  to grant loans to local communities. Some border banks have up to 45% of their accounts held by Mexicans who deposit their money in the US for security reasons. 

Under the new regulation, the information from the banks is reported to the Treasury then the IRS can provide that information to the Mexican Hacienda under the US/Mexican tax treaty.

The rules became effective on April 19, 2012. Mexican Citizens who have secreted funds in US banks need to consider whether those funds should be left there and pay Mexican income taxes on the interest earned by those funds on their Mexican tax returns.