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IRS Filing Requirements for U.S. Citizens
For Informational Purposes Only - Not to be Considered Tax or Legal Advice
Please Contact a Qualified Foreign Tax Professional to Discuss Your Specific Situation

Most people are unaware that there are strict filing requirement for U.S. citizens that own land, businesses, or bank accounts in Mexico.  The penalties for failing to file can be steep, even eclipsing the value of the assets held in Mexico. 

To make matters worse, finding the answers can be difficult.  Many U.S. tax professionals are unfamiliar with the Mexican Fideicomiso and other international ownership entities.  Mexican accountants are completely unaware of the U.S. laws and requirements.  And calls to the IRS often yield conflicting and confusing responses.

Below we list some requirements that may apply.  As tax law and the interpretations of it are constantly changing, be sure to discuss your specific situation with a qualified international tax professional.


Fideicomiso - The U.S. Citizen's Filing Requirements
IRS Form 3520 & 3520-A

Against the advice of the AICPA and other tax professionals, the IRS has chosen to consider the Mexican Fideicomiso as a Foreign Trust.  A U.S. citizen that is the Beneficiary of a Foreign Trust is required to file IRS Form 3520.  Form 3520a is supposed to be filed by the Trustee (The Mexican bank holding the Fideicomiso), but as a practical matter the U.S. citizen should file the 3520-A themselves as well.  Normally there is no tax due with the forms.

When to File: Form 3520 is due on the date that your income tax return is due, including extensions.  Form 3520-A is due by the 15th day of the third month after the end of the trust's tax year (probably March 15th for most people).

Penalties: Per the 2008 IRS Instructions - Failure to file Form 3520, the penalty is 35% of the gross value of any property transferred to a foreign trust.  Failure to file Form 3520-A, the penalty is 5% of gross value of the trust assets.  No penalties will be imposed if failure to comply was due to "reasonable cause" - of course the IRS has not clearly defined what they consider to be "reasonable cause"...

Special Note:  The IRS has an amnesty program available for Delinquent Filers that file BEFORE October 15, 2009.
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Mexican Corporations - The U.S. Citizen's Filing Requirements
IRS Form 5471 and Applicable Schedules

Generally, U.S. Citizens must file if they

  • Own 10% or more of a foreign corporation's stock

  • Are an Officer or Director of a foreign corporation in which a U.S. person, partnership, corporation, or trust owns 10% or more of the corporations stock.

  • Have control (voting power of stock over 50%) of a foreign corporation.

When to File: Form 5471 is due on the date that your income tax return is due, including extensions.

Penalties: Per the 2008 IRS Instructions - Failure to file Form 5471, the penalty in $10,000 for each annual accounting period  and a 10% reduction of the foreign taxes available for credit.  The penalties increase dramatically if the IRS mails a Notice of Failure to File.

Special Note:  The IRS has an amnesty program available for Delinquent Filers that file BEFORE October 15, 2009.
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Mexican Bank Accounts - The U.S. Citizen's Filing Requirements
U.S. Department of the Treasury Form TD F 90-22.1
Report of Foreign Bank And Financial Accounts (FBAR)

U.S. Person who has a financial interest, signature authority or other authority over foreign financial accounts if the aggregate value exceeds $10,000 at any time during the calendar year. If the cumulative value of your foreign financial accounts (bank, securities, and other financial accounts) from all countries was greater than $10,000 for even a minute, then you must file.

When to File: TD F 90-22.1 must be received on or before June 30 of the succeeding year (report for 2009 is due June 30, 2010).  Note that this form is mailed to the Department of the Treasury, NOT the IRS.

Penalties: The law governing form TD F 90-22.1 "provides for a non-willful penalty of up to $10,000 per violation for violations occurring after October 22, 2004. This penalty will be waived, however, if the person can show reasonable cause for the violation and if the person provides a late-filed [Form TD F 90-22.1] with the information that should have been reported earlier. Penalties for "willful" failure to file can be even more onerous: "Civil and criminal penalties, including in certain circumstances a fine of not more than $500,000 and imprisonment of not more than five years, are provided for failure to file a report, supply information, and for filing a false or fraudulent report."

Special Note:  The IRS has an amnesty program available for Delinquent Filers that file BEFORE October 15, 2009.
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