All U.S. citizens and Green Card holders must report worldwide income to the IRS even in if you are a dual citizen of Mexico. If you lived outside the U.S. on April 17th, 2017, the extended filing deadline for your 2016 tax return is Monday, June 15, 2017. An additional extension until October 16th is available if you file for an extension by June 15th. Here are some important tips on other foreign tax reporting forms which may apply to you.
Report of Foreign Bank and Financial Accounts
You generally must file Form 114 if you had an interest in foreign financial accounts whose aggregate value exceeded $10,000 at any time during the year. This also applies if you had signature or other authority over those accounts that belong to another. You must file Form 114 on line electronically by April 17, 2017. For 2016 there is an automatic extension until 10/16/17 to file this form.
FOREIGN EARNED INCOME EXCLUSION
Up to $101,300 of your earned income (from wages and self employment) may be exempt from US tax if you file FORM 2555 and live and work full time in Mexico. This is an amazing tax break only available to US expatriates. Learn more about the complex rules for qualifying for this income exclusion by reading IRS publication 54, which can be downloaded at www.irs.gov.
FOREIGN TAX CREDITS
The FORM 1116 is filed with your form 1040. You can claim credits for all income taxes paid in Mexico dollar for dollar against the tax on your US tax return on the same Income reported there. This avoids double taxation of the same income.
Information Return of U.S. Persons With Respect to Certain Foreign Corporations
If your Mexican real estate or business is held in a Mexican corporation, you must file this form each year on the due date of your form 1040 if you own 10% or more of the shares in the foreign corporation. This form is due on regular or extended due date of your personal return. For certain types of Mexican corporations you can make a special election with the IRS to treat them as flow through entities with all income, losses and foreign tax credits reported on your personal US form 1040. This election avoids double taxation of your Mexican corporation profits.
Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts
These forms was formerly required if you had property held in a Mexican Fideicomiso. The IRS decided several years ago that Fideicomiso owners were no longer required to file this form. Form 3520 still must be filed by April 17th, if you receive gifts from a nonresident of $100,000 or more during the calendar year. Failure to file this form and report foreign gifts can result in substantial penalties.
You may also have to file Form 8938, the Statement of Specified Special Foreign Financial Assets with your tax return.
Don D. Nelson is a US Tax Attorney who has specialized in helping Americans living and working in Mexico with their US Tax planning and compliance for the last 35 years. He is a partner in Kauffman Nelson LLP, CPAs.