NEW IRS TACTIC WILL LOCATE HIDDEN FOREIGN FINANCIAL ACCOUNTS IN MEXICO

Most expats in Mexico understand that under US FATCA law the banks in Mexico will be reporting the the foreign bank accounts held by US taxpayers and green card holders to the IRS.  Many have felt that their accounts with INTERCAM, MONEX and other non bank financial institutions in Mexico are safe from IRS scrutiny. Suddenly,  that is no longer the case.

The IRS has started to issue John Doe Court Subpoena's to US Banks that act as clearing houses (or correspondence banks) for foreign financial companies including stock brokers, money exchange companies, etc ordering them. to provide the IRS with records that will identify US taxpayers with

foreign financial accounts.

The IRS will then match the documents received pursuant to the subpoena with those who have filed FBAR forms (TDF 90-22.1) and for those who have not reported those foreign financial accounts will impose penalties of $10,000 or more and possibly seek criminal prosecution.  Recently the IRS convicted an 89 year old lady for not reporting her foreign bank accounts.

It does not appear the IRS has yet  started this procedure on Mexican accounts but no doubt they will begin soon. Therefore there is still time to file your FBAR forms for current and past years under the existing Offshore Disclosure Program or other methods that are available to avoid or reduce penalties.

We have helped well over a hundred expats living in Mexico catch up and successfully avoid or reduce penalties. We can also help you.  Visit our website at www.TaxMeLess.com  for more information and for help.

Remember your 2012 FBAR form must be received by the IRS prior to 6/30/13.  It cannot be extended.  In many situations you may have to also report those accounts on Form 8938 filed with your personal tax return also.

FBAR (TDF 90-22.1) FORMS ARE DUE ON 6/29 OR 6/30/12 FOR 2011- CAN BE FILED ON LINE - HUGE PENALTIES I NOT FILED

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

Link to file TDF 90-22.1 on line: http://bsaefiling.fincen.treas.gov/Enroll_Individual.html

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.

Violation	Civil Penalties	Criminal Penalties	Comments
Negligent Violation	Up to $500	N/A	31 U.S.C. § 5321(a)(6)(A) 31 C.F.R. 103.57(h)
Non-Willful Violation	Up to $10,000 for each negligent violation	N/A	31 U.S.C. § 5321(a)(5)(B)
Pattern of Negligent Activity	In addition to penalty under § 5321(a)(6)(A) with respect to any such violation, not more than $50,000	N/A	31 U.S.C. 5321(a)(6)(B)
Willful - Failure to File FBAR or retain records of account	Up 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 both	31 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 laws	Up 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 both	31 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 FBAR	Up 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 both	18 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).

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.

Form 8938 Report of Foreign Financial Assets - When Americans in Mexico and with Mexican assets must file

DO I NEED TO FILE FORM 8938, “STATEMENT OF SPECIFIED FOREIGN FINANCIAL ASSETS” FOR MY ASSETS IN mEXICO?

Certain U.S. taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 will report information about those assets on new Form 8938, which must be attached to the taxpayer’s annual income tax return.  Higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad (see below). Form 8938 reporting applies for specified foreign financial assets in which the taxpayer has an interest in taxable years starting after March 18, 2010.  For most individual taxpayers, this means they will start filing Form 8938 with their 2011 income tax return to be filed this coming tax filing season. Upon issuance of regulations, FATCA may require reporting by specified domestic entities.  For now, only specified individuals are required to file Form 8938. If you do not have to file an income tax return for the tax year, you do not need to file Form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold. If you are required to file Form 8938, you do not have to report financial accounts maintained by: a U.S. payer (such as a U.S. domestic financial institution),  the foreign branch of a U.S. financial institution, or  the U.S. branch of a foreign financial institution. Refer to Form 8938 instructions for more information on assets that do not have to be reported. You must file Form 8938 if: 1. You are a specified individual.  A specified individual is: A U.S. citizen A resident alien of the United States for any part of the tax year (see Pub. 519 for more information) A nonresident alien who makes an election to be treated as resident alien for purposes of filing a joint income tax return  A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico (See Pub. 570 for definition of a bona fide resident) AND 2. You have an interest in specified foreign financial assets required to be reported.  A specified foreign financial asset is: Any financial account maintained by a foreign financial institution, except as indicated above  Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely: Stock or securities issued by someone other than a U.S. person Any interest in a foreign entity, and  Any financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person. Refer to the Form 8938 instructions for more information on the definition of a specified foreign financial assets and when you have an interest in such an asset. AND 3. The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you: Unmarried taxpayers living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year Married taxpayers filing separate income tax returns and living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. Taxpayers living abroad.  You are a taxpayer living abroad if: You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year, or You are a US citizen or resident, who during a period of 12 consecutive months ending in the tax year is physically present in a foreign country or countries at least 330 days. If you are a taxpayer living abroad you must file if: You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year. Refer to the Form 8938 instructions for information on how to determine the total value of your specified foreign financial assets. Reporting specified foreign financial assets on other forms filed with the IRS. If you are required to file a Form 8938 and you have a specified foreign financial asset reported on Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, or Form 8891, you do not need to report the asset on Form 8938.  However, you must identify on Part IV of your Form 8938 which and how many of these form(s) report the specified foreign financial assets.  Even if a specified foreign financial asset is reported on a form listed above, you must still include the value of the asset in determining whether the aggregate value of your specified foreign financial assets is more than the reporting threshold that applies to you. BASIC QUESTIONS AND ANSWERS ON FORM 8938 FOR aMERICANS WITH FINANCIAL ASSETS IN mEXICO AND LIVING IN mEXICO. 1. What are the specified foreign financial assets that I need to report on Form 8938? If you are required to file Form 8938, you must report your financial accounts maintained by a foreign financial institution.  Examples of financial accounts include: Savings, deposit, checking, and brokerage accounts held with a bank or broker-dealer. And, to the extent held for investment and not held in a financial account, you must report stock or securities issued by someone who is not a U.S. person, any other interest in a foreign entity, and any financial instrument or contract held for investment with an issuer or counterparty that is not a U.S. person.  Examples of these assets that must be reported if not held in an account include: Stock or securities issued by a foreign corporation; A note, bond or debenture issued by a foreign person; An interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap or similar agreement with a foreign counterparty; An option or other derivative instrument with respect to any of these examples or with respect to any currency or commodity that is entered into with a foreign counterparty or issuer; A partnership interest in a foreign partnership; An interest in a foreign retirement plan or deferred compensation plan; An interest in a foreign estate; Any interest in a foreign-issued insurance contract or annuity with a cash-surrender value.  The examples listed above do not comprise an exclusive list of assets required to be reported. 2. I am a U.S. taxpayer but am not required to file an income tax return.  Do I need to file Form 8938? Taxpayers who are not required to file an income tax return are not required to file Form 8938.  3. Does foreign real estate need to be reported on Form 8938? Foreign real estate is not a specified foreign financial asset required to be reported on Form 8938.  For example, a personal residence or a rental property does not have to be reported. If the real estate is held through a foreign entity, such as a corporation, partnership, trust or estate, then the interest in the entity is a specified foreign financial asset that is reported on Form 8938, if the total value of all your specified foreign financial assets is greater than the reporting threshold that applies to you.  The value of the real estate held by the entity is taken into account in determining the value of the interest in the entity to be reported on Form 8938, but the real estate itself is not separately reported on Form 8938.   4. I directly hold foreign currency (that is, the currency isn’t in a financial account).  Do I need to report this on Form 8938? Foreign currency is not a specified foreign financial asset and is not reportable on Form 8938. 5.  I am a beneficiary of a foreign estate.  Do I need to report my  interest in a foreign estate on Form 8938? Generally, an interest in a foreign estate is a specified foreign financial asset that is reportable on Form 8938 if the total value of all of your specified foreign financial assets is greater than the reporting threshold that applies to you. 6. I acquired or inherited foreign stock or securities, such as bonds.  Do I need to report these on Form 8938? Foreign stock or securities, if you hold them outside of a financial account, must be reported on Form 8938, provided the value of your specified foreign financial assets is greater than the reporting threshold that applies to you.  If you hold foreign stock or securities inside of a financial account, you do not report the stock or securities on Form 8938.  For more information regarding the reporting of the holdings of financial accounts, see FAQs 8 and 9. 7. I directly hold shares of a U.S. mutual fund that owns foreign stocks and securities.  Do I need to report the shares of the U.S. mutual fund or the stocks and securities held by the mutual fund on Form 8938?  If you directly hold shares of a U.S. mutual fund you do not need to report the mutual fund or the holdings of the mutual fund.  8.  I have a financial account maintained by a U.S. financial institution that holds foreign stocks and securities.  Do I need to report the financial account or its holdings?  You do not need to report a financial account maintained by a U.S. financial institution or its holdings.  Examples of financial accounts maintained by U.S. financial institutions include: U.S. Mutual fund accounts IRAs (traditional or Roth) 401 (k) retirement plans Qualified U.S. retirement plans Brokerage accounts maintained by U.S. financial institutions 9.  I have a financial account maintained by a foreign financial institution that holds investment assets.  Do I need to report the financial account if all or any of the investment assets in the account are stock, securities, or mutual funds issued by a U.S. person? If you have a financial account maintained by a foreign financial institution and the value of your specified foreign financial assets is greater than the reporting threshold that applies to you, you need to report the account on Form 8938.  A foreign account is a specified foreign financial asset even if its contents include, in whole or in part, investment assets issued by a U.S. person.  You do not need to separately report the assets of a financial account on Form 8938, whether or not the assets are issued by a U.S. person or non-U.S. person.      10.  I have a financial account with a U.S. branch of a foreign financial institution.  Do I need to report this account on Form 8938? A financial account, such as a depository, custodial or retirement account, at a U.S. branch of a foreign financial institution is an exception to the general rule that a financial account maintained by a foreign financial institution is specified foreign financial asset.  A financial account maintained by a U.S. branch or U.S. affiliate of a foreign financial institution does not have to be reported on Form 8938 and any specified foreign financial assets in that account also do not have to be reported.  11. I own foreign stocks and securities through a foreign branch of a U.S.-based financial institution.  Do I need to report these on Form 8938? If a financial account, such as a depository, custodial or retirement account, is held through a foreign branch or foreign affiliate of a U.S.-based financial institution, the foreign account is not a specified foreign financial asset and is not required to be reported on Form 8938 12. I have an interest in a foreign pension or deferred compensation plan. Do I need to report it on Form 8938? If you have an interest in a foreign pension or deferred compensation plan, you have to report this interest on Form 8938 if the value of your specified foreign financial assets is greater than the reporting threshold that applies to you. 13. How do I value my interest in a foreign pension or deferred compensation plan for purposes of reporting this on Form 8938? In general, the value of your interest in the foreign pension plan or deferred compensation plan is the fair market value of your beneficial interest in the plan on the last day of the year.   However, if you do not know or have reason to know based on readily accessible information the fair market value of your beneficial interest in the pension or deferred compensation plan on the last day of the year, the maximum value is the value of the cash and/or other property distributed to you during the year.  This same value is used in determining whether you have met your reporting threshold.  If you do not know or have reason to know based on readily accessible information the fair market value of your beneficial interest in the pension plan or deferred compensation plan on the last day of the year and you did not receive any distributions from the plan, the value of your interest in the plan is zero.  In this circumstance, you should also use a value of zero for the plan in determining whether you have met your reporting threshold.  If you have met the reporting threshold and are required to file Form 8938, you should report the plan and indicate that its maximum is zero.  14. I am a U.S. taxpayer and have earned a right to foreign social security.  Do I need to report this on Form 8938? Payments or the rights to receive the foreign equivalent of social security, social insurance benefits or another similar program of a foreign government are not specified foreign financial assets and are not reportable.