Best Places to Retire Abroad...Mexico

Read about Chuck Bolotins current travels through Mexico with his wife and 2 dogs. Covers place@, experiences, travels and people other than taxes .  READ LINK BELOW

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RETIRING OR THINKING OF RELOCATING IN MEXICO, BELIZE, PANAMA OR EUCADOR?

If you are retiring or thinking of relocating your business to Mexico, Belize, Panama or Eucador you will find answers to a lot of questions on living, taxes, shopping, etc. at Best Places in the World to Retire

TAXATION OF AMERICANS (GRINGOS) UNDER MEXICAN TAX SYSTEM

Review and download this excellent PWC book on taxation of nonresidents in Mexico.  HERE  If you need help filing or planning for your US income Taxes while living, working or operating your business in Mexico contact us at www.TaxMeLess.com or email ddnelson@gmail.com

Mexican Citizens and other nonresidents with Assets in the US are Subject to US estate taxes

Mexican Citizens and other nonresidents with certain assets located in the United States will cause their estates to have to file US Estate Tax returns on the value of their assets (with some exceptions) located in the USA. The tax is based on the Fair Market Value of their Assets and can be up to 35%. Nonresidents only get an exemption from this tax equal to the first $60,000 value of their US estate. The balance  of the estate's assets are subject to the estate tax.  Real estate which was owned by a deceased nonresident is subject to this tax.  The estate can only deduct the mortgage balance due from the fair market value if the estate agrees to report to the IRS the value an details of the decedents worldwide assets including those in Mexico.

Due to the large chunk this estate tax can take out of a nonresident's estate, it is best to do some advance planning to attempt to reduce it.  Email us if you want help. Read more about the nonresident  estate tax here

Fast US Tax Facts for Americans Living and Working in Mexico By Don D. Nelson, Attorney, C.P.A.

Fast US Tax Facts for Americans Living and Working in Mexico

By Don D. Nelson, Attorney, C.P.A.

If you are a US Citizen you must file a US tax return every year unless your income is less than $ 9,700 (for 2010 and lower for earlier years) or have self employment-independent contractor net income of more than $ 400 US per year. You are taxable on your world wide income regardless of whether you filed a tax return in Mexico.

· As an US expatriate living in Mexico on 4/18/11, your 2010 tax return is automatically extended until 6/15 but any taxes due must be paid by 4/18 to avoid penalties. The return can be further extended until 10/15/10 if the proper extension is filed.

· For 2010 if you are a qualified expatriate you get a foreign earned income exclusion (earnings from wages or self employment) of $91,500, but this exclusion is only available if you file a tax return.

· If your spouse works and lives abroad, and is qualified, she can also get at $91,500 foreign earned income exclusion.

· You get credits against your US income tax obligation for taxes paid to foreign country but you must file a return to claim these credits.

· If you own 10% or more of a Mexican corporation or hold an interest in Mexican property through a Fideicomiso you must file special IRS forms each year or incur substantial penalties which can be greater including criminal prosecution if the IRS discovers you have failed to file these forms.

· Your net self employment income in Mexico is subject to US self employment tax of 15.3% (social security) which cannot be reduced or eliminated by the foreign earned income exclusion.

· Forming the correct type of Mexican corporation and making the property US tax elections with respect to that corporation can save you a significant amount of US income taxes.

· If at any time during the tax year your combined highest balances in your Mexican bank and financial accounts (when added together) ever equal or exceed $10,000US you must file a FBAR form with the IRS by June 30th for the prior calendar year or incur a penalty of $10,000 or more including criminal prosecution. This form does not go in with your personal income tax return and is filed separately at a separate address.

· We understand the Mexican income tax laws and can coordinate your US taxes with those you pay in Mexico to help you achieve the optimum tax strategy.

· In the past several years the IRS has hired more than 2,200 new employees to audit, investigate and discover Americans living abroad who have failed to file all necessary tax forms.

· Often due to foreign tax credits and the the foreign earned income exclusion expats living in Mexico and file all past year unfiled tax returns and end up owing no or very little US taxes.

· Beginning in 2011 a new law is in effect which requires all US Citizens report on a new form filed with their tax returns all of their world wide financial assets if in total the value of those assets are $50,000 or more.

· Income from certain types of foreign corporations are immediately taxable on the US shareholder's personal income tax return.

· If you own investments in a foreign corporation or own foreign mutual fund shares you may be required to file the IRS forms 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.

· The IRS is now matching up your US passport with your US tax records and now knows if you have not been filing all required US tax returns while you are living in Mexico.

· Download your 2010 US tax return questionnaire drafted expressly for Americans living in Mexico at www.TaxMeLess.com or at www.ExpatAttorneyCPA.com

Don D. Nelson, US Attorney, CPA

US Phone: (949) 481-4094, US Fax: (949) 218-6483

Email:ddnelson@gmail.com

Skype: dondnelson

Visit our US – Mexican Tax Blog

We have been preparing tax returns and assisting clients in Mexico with their US/Mexican tax planning for over 20 years.

Fideicomiso US Tax Compliance Update - Don't Miss the 9/23/09 deadline!

Under the IRS Offshore Voluntary Disclosure Program if a Fideicomiso Beneficiary has failed to file Form 3520A and 3520 (when required) they have until 9/23/09 to file those forms for the past six years without penalty if the property held by the Fido has produced no income during those past six years.  Though the IRS has not been clear, it has implied that after that date if someone files their past unfiled forms 3520 and 3520A forms they may impose the $10,000 late filing penalty for each year whether or not the Beneficiary has a reasonable excuse for late filing.  The same rules hold true for Fido Beneficiaries that have reported all of their income from the Fideicomiso, but failed to file the Forms 3520 and 3520A.

If you had unreported rental income from the Fido property and did not file those forms you must talk with an international tax expert to determine if you should enter the Voluntary Offshore Disclosure Program or risk the potentially  bigger penalties of not entering the program.  9/23/09 is the deadline to take action or risk  being assessed the tremendous penalties that the IRS can impose for not filing these forms.

US Fideicomiso Taxation

If you own property in Mexico in a Fideicomiso you must file Forms 3520 in its initial year of existence and in its final year of existence. You must file form 3520A for each year that it exists. That form was designed to be filed by the Trustee Bank, but none of them will do it, so therefore under IRS rules you as the beneficiary must file the form. These forms are filed separate your from your personal tax return. These forms must be filed even though your income is too low to require you to file a US tax return.

Failure to file these forms can result in monetary penalties. If the property in the fideicomiso generates no income (your house) or generates income and you have reported it on your US tax return if you attach a late filing excuse the penalties will be waived. If it generates income you did not report on your US tax return you may want to consider the IRS VOLUNTARY OFFSHORE DISCLOSURE PROGRAM which will end on 9/23/09 which could reduce your penalties for non filing and will stop any criminal prosecution for violating US tax law.

More information is at: http://www.taxmeless.com/page11.html



If you own property in a Mexican corporation you must file form 5471 with your yearly US tax return whether or not it makes income or you are required to file a US tax return. We will discuss this in a separate blog post.

If you wish assistance with these forms or with the Offshore Disclosure or forms 5471 contact me. I have over 20 years experience in Mexican - US taxation and other international tax matters. I do spend a great deal of time in Mexico and understand its business, real estate and taxes.