Two Expats in Mexico

An estimated 9 million Americans live abroad and a large percentage establish bank accounts in their new home country.
In the case of American retirees living outside the country, many even have their social security payments deposited directly into foreign accounts. Just how many people do this might surprise you.
According to statistical data provided by the U.S. Social Security Administration, just in the month of March, 684,635 payments were made to beneficiaries outside of the United States. Of that amount, 61,128 of those payments were sent to accounts in Mexico.
What many Americans living abroad don’t realize is that they are required to complete an annual report to the U.S. Government if the value of their foreign accounts exceeds $10,000 USD at any time during the calendar year (the Bank Secrecy Act of 1970). This report is entirely separate from your income tax return.
The report is called the Report of Foreign Bank and Financial Accounts (FBAR) and is submitted annually to the Financial Crimes Enforcement Network (FinCEN).
Who has to file?
A “United States person” that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.
A “United States person” is defined as United States citizens (including minor children); United States residents; entities, including but not limited to, corporations, partnerships, or limited liability.
Important: This includes people with dual citizenship.
Is this limited to my bank accounts?
No. The rule applies to all of your foreign financial accounts, which includes, but is not limited to the following:
A securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).*
* Taken directly from BSA Electronic Filing Requirements For Report of Foreign Bank and Financial Accounts (FinCEN Form 114)
How do I file?
All filing is done electronically via FinCEN’s portal: http://bsaefiling.fincen.treas.gov/main.html
The instructions and requirements are available in the FinCEN Form 114 via this link: www.fincen.gov/sites/default/files/shared/FBAR Line Item Filing Instructions.pdf
What is the due date to file?
The annual due date to file the FBAR is April 15th. If you fail to make the date, don’t worry — you get an automatic extension to October 15.
What are the penalties for not filing?
For violations occurring before August 1, 2016:
Non-willful violations: subject to a civil penalty of $10,000 per violation
Willful violations: subject to a civil penalty of $100,000 or 50 percent of the balance in the account, whichever is greater, at the time of the violation
You may also be subject to criminal penalties under 31 U.S.C. section 5322(a), 31 U.S.C. section 5322(b), or 18 U.S.C. section 1001.
For violations occurring on or after August 1, 2016:
Non-willful violations: subject to a civil penalty of $12,459 per violation
Willful violations: subject to a civil penalty of $124,588 or 50 percent of the balance in the account at the time of the violation, whichever is greater. The criminal penalties still apply.
Let’s Wrap This Up
In 2010, the United States enacted a piece of legislation called the Foreign Account Tax Compliance Act (FATCA) which requires foreign financial Institutions to report on the assets held by their U.S. account holders. This law has made it easier for the U.S. government to discover foreign accounts and sanction people who fail to complete their FBAR.
That basically means that if you fail to file this mandatory report, there’s a good chance that Uncle Sam will find out about it eventually and come calling.