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bajagrouper
Senior Nomad
Posts: 964
Registered: 8-28-2003
Location: Rincon de Guayabitos, Nayarit, Mexico
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Mood: happy and retired
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For US tax payers..re: Fideicomisos
On a couple of other Mexico message boards folks are talking about an IRS amnesty program for Americans who own property in the federal restricted
zone and have a Fideicomiso or a Mexican bank account who have not reported this on Sch.B of their tax returns...I have tried to search this subject
on this board but have found nothing, did I miss something? The amnesty program ends Sept. 23rd. 09...
I hear the whales song
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Hook
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Registered: 3-13-2004
Location: Sonora
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Where did you find info about this amnesty program?
I am aware of the controversies surrounding the question of filing or not. It's very murky. I have read statements by two individuals who say the IRS
told them you have to file and you dont have to file. Who knows?
But if there is an amnesty program, I'd like the details as we have not filed in the two years we've owned our property in a fide.
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bajagrouper
Senior Nomad
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Posted by John Dillinger, CPA, MS.tax
http://fideicomiso.wordpress.com/
Once the IRS announced their Offshore Voluntary Disclosure Program, March 23, 2009, foreign reporting requirements began receiving greater press
coverage. When the program was announced, all late forms were required to be sent to IRS Criminal Investigation with mandatory penalty frameworks
that had no reasonable cause exceptions.
I believe my repeated communications with the IRS helped provide the opportunity for those who did not know they were supposed to file Forms 3520
& 3520-A do so without fear of penalty. However, the IRS is only currently granting this relief until September 23, 2009.
If and when the IRS discovers that you have not filed the required forms, there is no guarantee of penalty relief. Now that the public is being made
aware of the filing requirements, if you don’t file, there is no reasonable cause exception. In fact, the reason for not filing would be considered
“willful neglect”. You now know that you were and are required to file, and did not.
I hear the whales song
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Hook
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This CPA seems to think that the IRS is only interested in income derived from foreign accounts/trusts. That would exempt those of us who simply hold
a fide for title and DO NOT ACCRUE INCOME FROM RENTING IT OUT.
http://www.vernonjacobs.com/voluntary-compliance.html
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bajajazz
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Registered: 12-18-2006
Location: La Paz, BCS, Mexico
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The use of this board to drum up personal business for creeps shilling for the IRS makes me want to puke.
The Gringo Gazette is particularly guilty of this, giving away column inches of space to tax consultants and PR types to scare the hell out of people,
scare them into using "professional" services they probably don't really need.
This kind of crap is destroying what most of us came down here to find . . . a simpler life without Big Brother and other officious chitheads looking
over our shoulders.
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DianaT
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| Quote: | Originally posted by Hook
This CPA seems to think that the IRS is only interested in income derived from foreign accounts/trusts. That would exempt those of us who simply hold
a fide for title and DO NOT ACCRUE INCOME FROM RENTING IT OUT.
http://www.vernonjacobs.com/voluntary-compliance.html |
Our accountant knows we own property in Baja and has never said anything about needing to report it, unless we sell it.
It is a second home---no income from it
Is there something we are missing? Why would we need to report it?
Diane
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dtbushpilot
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| Quote: | Originally posted by Hook
This CPA seems to think that the IRS is only interested in income derived from foreign accounts/trusts. That would exempt those of us who simply hold
a fide for title and DO NOT ACCRUE INCOME FROM RENTING IT OUT.
http://www.vernonjacobs.com/voluntary-compliance.html |
Until you sell it and are required to pay US capital gains along with Mexico taxes.....dt
"Life is tough".....It's even tougher if you're stupid.....
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Hook
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| Quote: | Originally posted by bajajazz
The use of this board to drum up personal business for creeps shilling for the IRS makes me want to puke.
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And who are you accusing of being complicit with chitheads on this issue, on this board?????
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Hook
Elite Nomad
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Registered: 3-13-2004
Location: Sonora
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| Quote: | Originally posted by dtbushpilot
| Quote: | Originally posted by Hook
This CPA seems to think that the IRS is only interested in income derived from foreign accounts/trusts. That would exempt those of us who simply hold
a fide for title and DO NOT ACCRUE INCOME FROM RENTING IT OUT.
http://www.vernonjacobs.com/voluntary-compliance.html |
Until you sell it and are required to pay US capital gains along with Mexico taxes.....dt |
Correct, as I read it.
So, at that point you would file form 3520, or is it some other form?
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k-rico
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Location: Playas de Tijuana
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Read "Reportable Event" on page 4:
http://www.irs.gov/pub/irs-pdf/i3520.pdf
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k-rico
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Has anybody established that a fideicomiso is a "foreign trust" in the eyes of the IRS?
If so, how?
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pacside
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Just received this email from my tax guy:
The IRS recently granted taxpayers who are required to report ownership or authority over foreign financial interests an amnesty for late filing of
their 2003 through 2008 reports. Proper late filing under the amnesty program will waive the onerous late-filing penalties normally associated with
these reports.
Who this applies to
: U.S. citizens (or other domestic legal entities) who own or have signature authority over foreign financial account(s) whose aggregate value(s)
exceeds $10,000 at any time during the calendar year. Such accounts may include, but are not limited to:
foreign bank accounts;
brokerage accounts;
mutual funds;
unit trusts.
What must be filed
: For each calendar year in which the ownership/authority criteria is met, Form TD F 90-22.1, Report of Foreign Bank and Financial Authority (or
"FBAR") must be filed by June 30 of the following calendar year to disclose such ownership or interest.
What happens if I don't file
: Account holders who do not comply with the FBAR reporting requirements may be subject to civil and/or criminal penalties:
Non-willful violations can result in penalties up to $10,000 for each violation;
Willful violations can result in penalties of the greater of $100,000 or 50% of the balance of the account at the time of the violations;
Criminal violations can result in a fine and/or ten years in prison.
How the 2009 Amnesty program applies and works
: The due date for 2008 fillings was June 30, 2009, however, the IRS established a short amnesty period for such filings. Account holders who have
only recently learned of their FBAR filing requirement, and who appropriately reported and paid taxes due on all income for years in which they should
also have filed an FBAR can file a delinquent FBAR for calendar years 2003 through 2008 before September 23, 2009 without incurring penalties. The
delinquent FBAR must be filed with a copy of that year's tax return and have a statement attached explaining why the report is filed late. For
taxpayers with 2008 tax returns due after September 23, 2009, the tax return does not need to accompany the 2008 FBAR.
If you think that you may need to file a FBAR before the September 23, 2009 deadline, or have any questions as to how the amnesty may affect you or
your business, please contact your accountant.
end of email
For what it's worth my accountant's opinion was that if you just own land or a home via a fideicomiso and do not plan on producing income with it
(i.e. not an income producing investment) and you don't plan on deducting expenses from said asset than it isn't necessary to file any additional
forms. Obviously, if you want to claim expenses on investment property on your u.s. taxes then you need to file form. He is very good at representing
folks in court over tax audits and is conservative.
pacside
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arrowhead
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| Quote: | Originally posted by k-rico
Has anybody established that a fideicomiso is a "foreign trust" in the eyes of the IRS?
If so, how? |
The IRS has established it. What a "foreign trust" is, is defined in the Internal Revenue Code, somewhere in the 6000's, as I recall. There is
supposedly a project at the IRS to review these fideicomiso's that only hold residential property to see if they can be made exempt. But that project
is on the back burner as a low priority item. The IRS won't grant a blanket exception for fideicomiso's as they are worried about tax abuse.
The rub is that if you own property in Mexico outside the restricted zone, then there is no fidei and nothing to report to the IRS. So, you have two
standards for the same ownership. The whole purpose of the trust reporting to the IRS is to catch income tax cheats.
By the way, there is another way out of the mess. You can ask for a private letter ruling. This is a process where you explain the situtation and then
ask the IRS to grant an exemption from the reporting requirements on the specific basis explained in the letter. A private letter ruling is only good
for the person to whom it was granted.
By the way, just as an aside, a fideicomiso is not a trust. Mexican law does not recognize trusts as in English Common Law. In Mexico, a fideicomiso
is actually a contract between the property owner and the bank. This has no bearing in the IRS definition of what a trust is though.
No soy por ni contra apatía.
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bajagrouper
Senior Nomad
Posts: 964
Registered: 8-28-2003
Location: Rincon de Guayabitos, Nayarit, Mexico
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From another CPA in Puerto Vallarta:
There was a recent article by John Dillinger, CPA in the Banderas News that discussed this issue. As a CPA, I agree with most of what Mr. Dillinger
had to say. The IRS regulation is applicable to all foreign trusts, with few exceptions, that have at least one US citizen as an owner. Unfortunately,
a fideicomiso is a trust that qualifies under these regulations. Attempts to have an IRS revenue ruling exempting fideicomiso's from these regulations
have not yet been successful. Because of the deficits the US is accumulating, the IRS is aggressively seeking sources of revenue. If you own a home
through a fideicomiso and do not earn income from that property, it will probably not create a tax liability for you. However, failure to file could
subject you to having penalties assessed against you. In my opinion, the prudent choice for those in this scenario where no income is earned is to
file the 3520A before September 23, 2009. For those that have earned income, you should contact a CPA and discuss your specific situation with them.
I hear the whales song
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k-rico
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Location: Playas de Tijuana
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"In my opinion, the prudent choice for those in this scenario where no income is earned is to file the 3520A before September 23, 2009."
Can't argue with that. Guess I'll file amended returns for 2006, 2007, and 2008. What fun!! I don't generate any income off the property so I guess it
can't hurt.
I wonder if there is a downside.
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bajagrouper
Senior Nomad
Posts: 964
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Location: Rincon de Guayabitos, Nayarit, Mexico
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Mood: happy and retired
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Hola K-rico, I don't like this news either, trying to find out more info this afternoon I called the IRS Trust Dept. It took a while and I thought my
phone battery was going to die but after about a half hour on the phone the very nice agent gave me the bad news...
Even if one is not making money or renting their property the IRS still insists a Fidi. is a foreign trust, she told me to fill out Form 3520 for the
tax year 2008 and report the year the trust was made, the fill out form 3520A for each year trust has been in place, adding a note that I paid for the
trust, am paying a fee each year to bank, there is no distribution from trust and no money is being made from rental of property...
Just one more thing to do before I leave for my place in Mexico...
I hear the whales song
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arrowhead
Banned
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| Quote: | Originally posted by k-rico
I wonder if there is a downside. |
The downside is that the IRS penalties for failure to file the forms on a timely basis are 20% of the assets of the trust -- as I think I recall. So,
if the only thing in the fideicomiso is your $300,000 baja beach house, you can get hit with a $60,000 penalty, and then they start adding interest
onto that.
Isn't it strange that in all the presentations on buying Mexican real estate, whether on the web, in brochures, or in person, not one presentation has
ever mentioned the IRS foreign trust tax reporting requirements? Imagine that. 
No soy por ni contra apatía.
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slimshady
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Don't for one second even think the IRS knows anything about a FIDO. GIving them info that they don't have is rediculous. Providing them with info
that they turn around and use on you, is financial suicide.
Simply don't have more than 10 k in an account .
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Hook
Elite Nomad
Posts: 9010
Registered: 3-13-2004
Location: Sonora
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| Quote: | Originally posted by slimshady
Don't for one second even think the IRS knows anything about a FIDO. GIving them info that they don't have is rediculous. Providing them with info
that they turn around and use on you, is financial suicide.
Simply don't have more than 10 k in an account . |
But our fideicomisos are worth more than 10k. How do you propose getting around that?
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BajaBella
Newbie
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Registered: 3-25-2009
Location: San Quintin
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| Quote: | Originally posted by pacside
: For each calendar year in which the ownership/authority criteria is met, Form TD F 90-22.1, Report of Foreign Bank and Financial Authority (or
"FBAR") must be filed by June 30 of the following calendar year to disclose such ownership or interest. | Quote: |
We had to fill out for each Dollar and each Peso account we are signers of. The form asks for the highest balance amount during the calendar year.
And now, part of my accountant's response to this:
"The Forms referred to have to do with information to be reported for transactions with a Foreign Trust with a US owner, and gifts of $12,000 or
greater to or from a Foreign Trust.
I think the focus of this effort is to start reporting, and to tax income that was sent directly to a foreign country (like the Cayman Islands or
Bermuda into offshore bank accounts owned by a US owner), in order to avoid paying US income taxes on it. This has been an enormous effort by the IRS
in the past few years."
[Edited on 8-8-2009 by BajaBella] |
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