To file or not to file, that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing end them?
To die: to sleep; No more;
and by a sleep to say we end
The heart-ache and the thousand natural shocks
That flesh is heir to,
’tis a consummation Devoutly to be wish’d.
To die, to sleep;
To sleep: perchance to dream: ay, there’s the rub;
For in that sleep of death what dreams may come
When we have shuffled off this mortal coil,
Must give us pause: . . .
Yes, sometimes it seems easier to shuffle off this mortal coil, than to fill-out and file Federal Forms with the US Treasury and the IRS. (Where filing on-time from Mexico presents its own problems: if you use Turbo-Tax, you can only e-file from Mexico if you still have and list a US address, while H&R Block’s TaxCut allows e-filing from Mexico, without a US address.)
Back to the points about FBAR’s and Fideicomisos:
Requirements for US Tax filing . . .
Since we just went through the annual Tax-Time angst rituals, I raised the question among some ex-pat internet pals on filing requirements the FBAR (Foreign Bank and Financial Account Reporting) for aggregate foreign accounts and trusts worth more than $10,000K on the Mexconnect website – with emphasis on Fideicomiso requirements – and the following reply came back:
“I was concerned about Fbar filing. I called the treasury dept.
I spoke to a women in the Fbar division I started telling her about fidecomisos before I could get the entire word out she mentioned fidecomisos. I asked her how she knew about them? She said many people called last year to ask if they have to file Fbar for the trust. She said it was discussed in full detail and since the trust is not used for stock bonds, or any other type of investment and no cash could go in or out you do not have to file no matter the value of the property in the trust.
She said if I wanted to I could ask the IRS that deals with Fbar, she gave me their email address.
I emailed the question in explaining I have a fide. and explained that the other person in Fbar division said you do not have to file if you have a trust.
I got an answer back (one word: correct)”
http://www.mexconnect.com/cgi-bin/forums/gforum.cgi?post=162522;sb=post_latest_reply;so=ASC;forum_view=forum_view_collapsed;page=last;#last
This seems to tie a nice bow onto the question of whether US expats who own homes/property using Mexican real estate trusts (Fideicomisos ): Since no cash, nor stocks, nor options are transferring is moving in or out, Fideicomiso trusts for Mexican real estate do not require Form TD F 90-22.1 filing. If you have aggregate foreign bank accounts or investment or cash trusts exceeding $10K in that Tax Year, you still have to file.
In a follow-up report of the web author’s communications with Treasury Dept. officials, the Treasury and IRS are currently standing behind the stipulation that if filers are reporting all income, then the Fideicomisos on property are not an issue, yet the Treasury folks further explain that they are currently drafting a formal release of their final opinion(s)/ruling(s) on the matter of Fideicomisos, which leaves the door slightly open for higher-ups to possibly reverse the US Govt’s current position.
The official IRS & Treasury rules on FBARS are listed in these web Publications & FAQ’s:
http://www.irs.gov/businesses/small/article/0,,id=210244,00.html
http://www.irs.gov/businesses/small/article/0,,id=148849,00.html
The actual form is at:
http://www.irs.gov/pub/irs-pdf/f90221.pdf
Disclaimer: Yucalandia and its authors are not tax preparation experts, though they have been doing their own US tax filings for 46 years, are 10:10 in disputes raised by US tax officials, have coincidentally prepared returns for 8 other individuals over the years, and enjoy accumulating and passing along helpful tidbits of tax information for others to do with what they wish. Granted, this truly is an odd hobby. . .
Helpful?
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If you liked this article, you might also check out this related article: “US Income Tax Filing Information for Ex-Pats” at: (or access under Living in Yucatan (see header) )
US Income Tax Filing Information for Ex-Pats
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Please Continue to Make Comments and Replies to Help Keep This Information Current!
Disclaimer: This information is not meant as legal advice. It is for educational and informational purposes only. Government policies vary between States and offices, and Mexican Government officials have broad discretion in how they individually enforce policies, so, your personal experiences may vary. See a professional for advice on important issues.
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Feel free to copy while giving proper attribution: YucaLandia/Surviving Yucatan.
© Steven M. Fry
Read on, MacDuff!
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Our neighbor here in Baja Sur was audited last year by the IRS and faced severe penalties for not filing or reporting his Fideicomisos on the 3530/3520A forms. He hired an attorney out of Texas (costing $10k dollars) who took his case to the National office of the IRS . The National office told the local IRS agents to back off, but they would not go as far as to state their position in writing regarding fideicomisos. He did not have to pay the penalties which were $350k dollars.
After his experience, we filed the 3520′s for the first time last year and hired a CPA to assist with back- filing for the 5 years prior. It’s a pain in the butt. This is a very informative website- are there articles here where you’ve discussed this issue? Opinions abound on online forums regarding this issue.
Thanks for the info about the FBAR filing. I wasn’t aware this form was required for our new Mexican checking account (and had no idea there was a question regarding it’s application to Fide’s). I thought it was strange when I filed out the 1040 this year where it asks about foreign bank accounts but doesn’t ask you to elaborate. Our US tax guy made no mention of the FBAR filing requiremnt either – thanks dude.
Cindy,
Great to hear from you!
Expats here in Mexico tend to believe that Mexico is the (only) Land of Bureaucratic Personal Interpretations. It seems their Northern Brethren in the US IRS have learned some of the same tricks. A friend here advises that your friend request a formal ruling from the IRS in Washington DC on their case. The rulings, issued as individual letters, are not broadly or universally binding on future IRS decisions for everyone, but if enough expat fidei comiso holders howl for letters, the IRS jeffes in Washington may get the message that Fidei Comisos should not be considered financial instruments => hopefully they will will make a new rule/regulation that Fidei Comiso holders do not have to file under FBAR requirements.
THANKS!
steve
There’s scores of ways to get the wrong impression when dealing with these complex issues. You were right, in your website, to say that fideicomisos are not accounts so as to trigger a Form TD F 90-22.1 filing, but the information should have been elaborated to say this did NOT mean you didn’t have a Form 3520 and 3520a filing requirement.
Hey Tony,
The guidance/advice out of Washington’s IRS office on FBARs says that real estate Fideicomisos should not be treated as fiscal instruments reported under FBAR rules, but this is NOT a final RULE. As a result, some individual IRS offices and IRS agents are fining Americans with Fideicomisos that are not registered under FBAR rules.
The IRS may ultimately rule that Fideicomisos must be filed as Foreign Trusts, since Americans can realize significant capital gains on the purchase and resale of foreign real estate, and we know how the IRS wants to tax all gains/income.
steve
I think the two reporting requirements must be clearly distinguished, to avoid confusion, the first being those which related to foreign accounts, and the second being those that relate to foreign trusts. They each have their own rules, and require the use of different forms.
Comments about FBAR not requiring the reporting of foreign trusts, which seems to be the case to me, too, should not be understood to mean that the requirements to report foreign trusts, which is another of the reporting requirements, do not apply.to fideicomisos.
Cautious practitioners are recommending that fideicomisos be reported annually, as foreign trusts, until the IRS rules otherwise.
Hello Guys, quick question: are there any Canadians accessing this site for information. I notice most of the topics relate to US expats and don’t see any Canucks replying?? I would love to hear from some Canuck expats.
Lauren