Fideicomiso Filing Requirements May Change

It is rumored that an attorney in Texas has applied for a private letter ruling on behalf of a client asking for a ruling from the IRS that an owner of a property held in a Fideicomiso does not have to file forms 3520 and 3520A. Private letter rulings are only binding on the IRS with respect to the individual taxpayer who requested it, though sometimes the IRS will apply them to everyone.  That ruling is expected to be released within the next month and finally for the first time there will be an IRS written declaration on filing requirements for Fideicomisos.

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.

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.

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.

Complete Form 8938 and TDF 90-22.1 Guidance In Simple Chart Form

The IRS has just published further information on when to file forms 8938 (to report foreign financial assets) and TDF 90-22.1 (FBAR) to report foreign financial accounts. Their guidance clarifies when foreign currency and precious metals located in foreign countries must be reported. The Chart is easy to understand and can be read HERE.

If the value of  the assets in your Fideicomiso, Mexican bank accounts and Mexican corportion exceed the thresholds set forth in this table, they must be reported on this form as well as on Forms 5471, 3520, 3520A, etc.

If you wish assistance in preparing these forms or wish to have your own self prepared forms reviewed by an expert contact us.

Senate Expected to Pass Bill that would Revoke Passports of Seriously Delinquent US Taxpayers

Pay Your IRS
Taxes or Lose your US Passport

The Senate has unanimously approved a provision to a highway transportation bill that would revoke the passports of people with seriously delinquent tax debts. This addition to the bill would allow the State Department to deny, revoke or limit a passport for any individual whom the Internal Revenue Service has certified as having a “seriously delinquent tax debt” in excess of $50,000.  If passed these rules would apply to those living in Mexico who have not been filing their US Tax returns for filing their taxes.

A seriously delinquent tax debt would be one for which a notice of a federal tax lien or a notice of a levy has been filed. An exception is allowed when the debt is being paid in a timely manner under an agreement with the IRS, or if collection on the debt has been suspended because of a collection due process hearing or other relief has been requested or is pending.

The Senate will vote on the overall bill and pass it later this week.The House is will take up the bill in the coming weeks  NOTE: THIS BILL DID PASS AND IS NOW THE LAW!