# Questions about receiving retirement, FATCA, and FBAR



## RTL44 (Nov 26, 2013)

I have been reading and searching the threads on here for a few days (as well as other places), but have not been able to find the answers to the questions I have about FATCA & FBAR as it pertains to my situation.

My situation is:
I will be retiring in a year. My wife & I are building a house in Mexico where we will live full time. My retirement will be from my US based state teacher's retirement system and will be supplemented by IRA's.

I was originally planning on having a Mexican bank account to have my retirement benefit deposited directly there, but am concerned about maintaining a local (Mexican) account and having to deal with FBAR and/or FATCA. 

Am I concerned for little or no reason? 

What advice would you have? 

I have a call in to my accountant, but I'm not sure he deals with any other expats.

Thanks in advance...


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## BBCWatcher (Dec 28, 2012)

There's no particular, unique concern. If you have any foreign (non-U.S.) financial account you may be subject to FBAR and/or FATCA reporting if you meet or exceed the thresholds for reporting. It doesn't matter where you live, and it doesn't matter where the account is held (outside the U.S.)

Do you actually need a bank account in Mexico? Or would low cost U.S. ATM/debit and credit cards provide everything you need?


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## Bevdeforges (Nov 16, 2007)

For a plain old vanilla bank account (checking account, maybe with a related savings account) there's really no problem and no onerous provisions of either FBAR or FATCA. FBAR is a simple report of your "overseas" (i.e. non-US) bank accounts, with a statement of the high balance for the year (which can be estimated). (And, if you have only the one account and the balance never rises above $10,000, there is no reporting requirement anyhow.)

More and more governments are requiring a list of foreign bank accounts as part of the income tax process, and for most people this is a simple clerical task with little or no risk of follow up of any sort.

FATCA begins to get a bit more complicated - but for those resident outside the US, none of the FATCA requirements kicks in until you have at least $200,000 in financial assets (held outside the US) of the type they are asking you to report.

You probably want to have a Mexican bank account, if only to avoid having to constantly juggle the exchange rates. If you're receiving US Social Security, it's usually possible to have the US Consulate direct deposit your monthly payment into a Mexican bank account for you - and the Consulate can get a far more favorable exchange rate than you can as an individual.

All the current "fear and loathing" related to FBAR and FATCA is related to those individuals who have large and/or complicated investments outside the US (often with the intention of avoiding taxation). 
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

Bevdeforges said:


> ...the Consulate can get a far more favorable exchange rate than you can as an individual.


The U.S. consulate isn't in the exchange loop. U.S. SSA deposits directly into Mexico.

Even so, I don't know about that. The few anecdotal reports I've found (posted by residents of Mexico) suggest their private exchange rate is better (or at least no worse) than what the U.S. Social Security Administration can manage, provided of course you're using low cost U.S. ATM/debit and credit cards to tap funds. For example, there's a popular U.S. credit card that will do ~0.5% _better_ (net) than the interbank exchange rate, and that's really rather good.

I'm certainly not opposed to opening a foreign bank account if it adds value, but maybe it doesn't in these circumstances. YMMV. My experiences certainly have varied. Sometimes it has made sense to have a local account, sometimes not.


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## RTL44 (Nov 26, 2013)

Thanks for the replies! I can probably manage to keep my "foreign" balances below $10k, but what about if I have to make a big purchase...like a car or something? For example. if I transfer $12,000 into my Mexican account (if I end up with one) to use to buy a car, then I have to file a FBAR?


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## Bevdeforges (Nov 16, 2007)

RTL44 said:


> Thanks for the replies! I can probably manage to keep my "foreign" balances below $10k, but what about if I have to make a big purchase...like a car or something? For example. if I transfer $12,000 into my Mexican account (if I end up with one) to use to buy a car, then I have to file a FBAR?


In the situation you describe, yes, you'd file an FBAR for the year that you transferred the money into your account. Except, if you manage to make the transfer in and payment out in the same month so that the balance has cleared by the statement date. (There is an option to report only the highest statement balance for the year.)
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

Bevdeforges said:


> Except, if you manage to make the transfer in and payment out in the same month so that the balance has cleared by the statement date. (There is an option to report only the highest statement balance for the year.)


Well, not exactly. Last I checked and as I recall, the reporting rules allow you to take that approach _if you don't have better information_. You do have better information if you've bought a car. You're driving the car, after all.

Backing up two steps here, there's nothing whatsoever wrong with being required to file a FBAR (FinCEN Form 114) and then filing the report. It's not hard, and it doesn't cost anything -- not even postage. So if you want to have a bank account in Mexico, fine, no problem. Just send in the report if the account balance grows sufficiently large, that's all.

As an analogy, when you travel to Mexico you'll probably have to fill out a customs declaration card. That's a mandatory report. Is the fact that you have to make a declaration a reason for you not to move to Mexico? If it is, OK, don't go to Mexico. It's the same thing: you undertake activity X and that requires filing report Y. (And customs declarations sometimes require paying import duties and taxes. FBARs and FATCAs don't.)


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## RTL44 (Nov 26, 2013)

BBCWatcher said:


> Well, not exactly. Last I checked and as I recall, the reporting rules allow you to take that approach _if you don't have better information_. You do have better information if you've bought a car. You're driving the car, after all.
> 
> Backing up two steps here, there's nothing whatsoever wrong with being required to file a FBAR (FinCEN Form 114) and then filing the report. It's not hard, and it doesn't cost anything -- not even postage. So if you want to have a bank account in Mexico, fine, no problem. Just send in the report if the account balance grows sufficiently large, that's all.
> 
> As an analogy, when you travel to Mexico you'll probably have to fill out a customs declaration card. That's a mandatory report. Is the fact that you have to make a declaration a reason for you not to move to Mexico? If it is, OK, don't go to Mexico. It's the same thing: you undertake activity X and that requires filing report Y. (And customs declarations sometimes require paying import duties and taxes. FBARs and FATCAs don't.)


OK - so there are no penalty or fees for having or maintaining accounts in excess of $10k? Sorry for my ignorance, I guess I don't understand the point of FBAR then. 


edit - OK - I just found this:

"The FBAR is not a tax filing requirement. It is part of a set of laws called the Bank Secrecy Act. Although the forms are filed with Internal Revenue Service (IRS), the rules governing the reporting requirements are not tax based. Examination and enforcement authority related to FBAR filings has been delegated to IRS. A primary purpose of the FBAR filing is to track hidden money in foreign financial accounts used for illicit purposes (e.g., tax evasion, money laundering or terrorism)."

That all sounds good, but does the US really think that tax evaders, money launderers, and terrorists are going to comply with this?


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## BBCWatcher (Dec 28, 2012)

RTL44 said:


> That all sounds good, but does the US really think that tax evaders, money launderers, and terrorists are going to comply with this?


No! And that's precisely the point. Willful failure to declare is a crime, and it's really, really easy to prosecute failure-to-file crimes. It might be tougher to prosecute underlying crimes like illegal drug dealing, money laundering, tax evasion, etc.

Do you think those who illegally smuggle goods file truthful customs declaration forms? No, of course not. But those individuals are immediately legally screwed even without prosecutors having to prove actual illegal smuggling.

How was Al Capone prosecuted? For paperwork crimes: failure to file truthful tax returns. Not for mere murder and mayhem. Paperwork crimes are useful! Relatedly, so is probation. Violate your probation terms -- an easy administrative determination -- and you can go back to prison quickly, without all that pesky trial, judge, and jury stuff.


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## ForeignBody (Oct 20, 2011)

RTL44 said:


> edit - OK - I just found this:
> 
> "The FBAR is not a tax filing requirement. It is part of a set of laws called the Bank Secrecy Act. Although the forms are filed with Internal Revenue Service (IRS), the rules governing the reporting requirements are not tax based. Examination and enforcement authority related to FBAR filings has been delegated to IRS. A primary purpose of the FBAR filing is to track hidden money in foreign financial accounts used for illicit purposes (e.g., tax evasion, money laundering or terrorism)."


This is incorrect. the filing is not with the IRS but with the Department of Treasury - actually the Financial Crimes Enforcement Network, just to scare us all!!


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## Bevdeforges (Nov 16, 2007)

ForeignBody said:


> This is incorrect. the filing is not with the IRS but with the Department of Treasury - actually the Financial Crimes Enforcement Network, just to scare us all!!


The FinCEN thing is relatively new. Back when you filed your FBAR forms with the Treasury Department it was worth noting that Treasury is the IRS' boss. Haven't researched it to any great extent, but my impression is that FinCEN is another department within the Treasury Department.
Cheers,
Bev


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## RTL44 (Nov 26, 2013)

ForeignBody said:


> This is incorrect. the filing is not with the IRS but with the Department of Treasury - actually the Financial Crimes Enforcement Network, just to scare us all!!


Hmm..ok. I got that info from this site: For the Record : Newsletter from WTAS : May 2012 : FBAR vs. Tax FBAR - What's the Difference?


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