How does the Foreign Account Tax Compliance Act (FATCA) affect me if I move to Mexico?

What people need to be aware of is that the US government passed laws to stop people from hiding money offshore. The law was probably intended for people with lots of assets offshore, but unfortunately some of these laws are hitting a lot of regular people, such as elderly, retired couples who want to come to Mexico and stretch their social security check.
 
There are two thresholds that people need to be aware about. On the tax returns on schedule B it says, “Do you have...

What people need to be aware of is that the US government passed laws to stop people from hiding money offshore. The law was probably intended for people with lots of assets offshore, but unfortunately some of these laws are hitting a lot of regular people, such as elderly, retired couples who want to come to Mexico and stretch their social security check.
 
There are two thresholds that people need to be aware about. On the tax returns on schedule B it says, “Do you have more than $10,000 in a foreign institution?” So if you have more than $10,000 total you need to check a box and file a form with the IRS. If you have over $50,000 then there’s another treasury department form to file. A lot of people are innocently falling astray because they are not aware of the law or sometimes their non-compliance can be as innocent as, “Oh, we wired money to an account last year to buy a house. It was only in the account for one day or two.” I advise people to be very careful and if they can, to avoid having more than US $5,000 in a Mexican institution to not have to deal with these reporting requirements.
 
For a number of reasons, the training of bank personnel can be very low in Mexico and the people who work at banks may have very little training, no degree, were selling doughnuts or potato chips a few months earlier and they often make misstatements about investments to foreigners who have a good amount of money in their Mexican account, and often, they make it difficult to take your money out. We’ve seen a lot of deceit on behalf of the banks as well as the devaluation of the peso and you have these tax laws from the US whereby if you fall astray they can fine you thousands of thousands of dollars per account.  If you open three little accounts and you have $11,000 total in them, you can owe more than that in taxes every year if you do not report those accounts. So it’s not worth it for a number of reasons to keep too much money in a foreign bank. If you’re going to buy a house you can wire money at the last minute to the seller’s account after putting in a deposit. That’s the best way to save people from falling astray of the tax laws or having to deal with compliance.

 

(American expat Gary Jennings lived in Mexico for 12 researching and writing his historical novels about Mexico. His novel "Aztec," pictured.)