Uncle Sam Peeking At Your Mexican Account

There’s Nowhere Left To Hide!
BY: ORLANDO GOTAY

By now, you may have heard that under the FATCA law, the US Treasury and the Mexican Tax Service (SAT) have entered into agreements to exchange financial information.  The purpose:  to discover those who have assets or income in one country, which should have been reported and taxed by the other.

The traded information is by no means equal.  Mexico provides the US Treasury much more sophisticated and complex data, but they are already working with what they’ve got.

The Mexican journal El Economista recently reported that SAT is already taking steps to provide the next batch of account information on Americans in September.  To that end, it published two amendments to the Mexican tax regulations, instructing banks how to sift through accounts with “indicia” of ownership or control by U.S. persons.  This applies to accounts, whether one actually owns the money or just has signature authority over it, for both personal and business accounts.  The scope goes far beyond what we know as bank accounts.  A wide range of financial instruments and arrangements is also reportable.

Your local Mexican bank may send a letter informing you that for “regulatory purposes” you may have to provide documentation proving that you are a “U.S. person” or not.  Failure to reply could cause the bank to close the account or to classify you as a “recalcitrant” account holder.

Pretty soon, U.S. persons who own or have signature authority over foreign financial accounts whose total value exceeded $10,000 USD at any time during 2015 must prepare a Foreign Bank Account Report for the US Treasury.  Treasury already issued official rates for the Mexican peso, 17.3620 per dollar.

Assuming only one peso account, if at any time it had a balance of 173,620 pesos, it may be reportable.  For multiple accounts, the maximum value of each is added up.  Accounts with negative values count as zero.

It is easy to see how this is not an exercise that should be left for the last minute. Consider there are substantial penalties for failing to file accurate FBARs on time.  FBAR records should be kept for at least six years. Dual nationals (and so called “accidental Americans”) who ignore the fact that they may have U.S. filing obligations may come in for a less than pleasant surprise.

The SAT will also be combing through the southbound data, and no doubt it will also try to identify those who should have been reporting in Mexico, but were not. this, just in case someone thought the U.S. could be a fiscal paradise.