Tuesday, June 26, 2012

IRS Announces Efforts to Help U.S. Citizens in Mexico, Including Dual Citizens and Those with Foreign Retirement Plans

The Internal Revenue Service today announced a plan to help U.S. citizens residing in Mexico and elsewhere overseas, including dual citizens, catch up with tax filing obligations and provide assistance for people with foreign retirement plan issues.   "Today we are announcing a series of common-sense steps to help U.S. citizens abroad get current with their tax obligations and resolve pension issues," said IRS Commissioner Doug Shulman.

Shulman announced the IRS will provide a new option to help some U.S. citizens and others residing abroad and in Mexico who haven’t been filing tax returns and provide them a chance to catch up with their tax filing obligations if they owe little or no back taxes. The new procedure will go into effect on Sept. 1, 2012.

The IRS is aware that some U.S. taxpayers living in Mexico have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs).  Some of these taxpayers have recently become aware of their filing requirements and want to comply with the law.

To help these taxpayers, the IRS offered the new procedures that will allow taxpayers who are low compliance risks to get current with their tax requirements without facing penalties or additional enforcement action. These people generally will have simple tax returns and owe $1,500 or less in tax for any of the covered years.

The IRS also announced that the new procedures will allow resolution of certain issues related to certain foreign retirement plans (such as Canadian Registered Retirement Savings Plans).  In some circumstances, tax treaties allow for income deferral under U.S. tax law, but only if an election is made on a timely basis.  The streamlined procedures will be made available to resolve low compliance risk situations even though this election was not made on a timely basis.

Taxpayers using the new procedures announced today will be required to file delinquent tax returns along with appropriate related information returns for the past three years, and to file delinquent FBARs for the past six years. Submissions from taxpayers that present higher compliance risk will be subject to a more thorough review and potentially subject to an audit, which could cover more than three tax years.

The IRS also announced its offshore voluntary disclosure programs have exceeded the $5 billion mark, released new details regarding the voluntary disclosure program announced in January and closed a loophole used by some U.S. citizens.  See IR-2012-64 for more details.

Wednesday, June 20, 2012


Your TDF 90-22.1  (FBAR form) where you must report to the IRS your foreign bank and financial accounts must arrive at the designated address by 6/29/12 or be filed on line no later than 6/30/12.  No extensions are allowed. You must report accounts owned by you or that you have signature authority or control over.

You must report your Intercam accounts, Mexican bank accounts, and other Financial Accounts in Mexico

This form must be filed for your 2011 foreign financial accounts highest balances during 2011 exceed $10,000 US. Therefore, you need to combine these highest balances to determine if you need to file this form. Foreign financial accounts (but not limited to these) which must be on the form include:
  • Bank and savings accounts
  • Stock Brokerage Accounts
  • Pension plans
  • Cash surrender value in foreign life insurance and annuities
  • Gold held by another company or person for safe keeping.
Best to file the form Certified mail with return receipt so you have proof of filing or by DHL, UPS, or Fed Exp.

If you are required to file this form, you may also be obligated to file Form 8938 with your personal US tax return.

Link to download  paperTDF 90.22.1(FBAR): http://www.irs.gov/pub/irs-pdf/f90221.pdf

Potential Penalties for Not Filing or Filing Late:

The following chart highlights the civil and criminal penalties that may be asserted for not complying with the FBAR reporting and recordkeeping requirements.
Civil Penalties 
Criminal Penalties 
Negligent ViolationUp to $500 N/A31 U.S.C.
§ 5321(a)(6)(A)
31 C.F.R. 103.57(h)
Non-Willful ViolationUp to $10,000 for each negligent violationN/A31 U.S.C. § 5321(a)(5)(B)
Pattern of Negligent ActivityIn addition to penalty under § 5321(a)(6)(A)
with respect to any such violation, not more than $50,000
N/A31 U.S.C. 5321(a)(6)(B)
Willful - Failure to File FBAR or retain records of accountUp to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation.Up to $250,000 or 5 years or both31 U.S.C. § 5321(a)(5)(C)
31 U.S.C. § 5322(a)
and 31 C.F.R. § 103.59(b) for criminal.
The penalty applies to all U.S. persons.
Willful - Failure to File FBAR or retain records of account while violating certain other lawsUp to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation.Up to $500,000 or 10 years or both31 U.S.C. § 5322(b) and 31 C.F.R. § 103.59(c) for criminal
The penalty applies to all U.S. persons.
Knowingly and Willfully Filing False FBARUp to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation.$10,000 or 5 years or both18 U.S.C. § 1001,
31 C.F.R. § 103.59(d) for criminal.  The penalty applies to all U.S. persons.
Civil and Criminal Penalties may be imposed together.  31 U.S.C. § 5321(d).