It’s that time of year again – time to pay our US taxes. Yes, even though we live in Mexico full-time, we still need to file a US tax return.
Along with my US taxes, I also file an FBAR. While I was preparing this year’s report, a question arose:
If I hold MX pesos within a Wise (formerly Transferwise) multi-currency account, do I have to file an FBAR?
First up, lets start with a few definitions
What’s Wise?
Wise, formerly TransferWise, is an international account for over 50 currencies, with instant, super-cheap money transfer, a card to spend in any currency, bank details to get paid in 30 different countries, multi-currency direct debits, and other revolutionary stuff.
For more details, see our past post on Maximizing currency conversions (Buy your pesos at the right time)
What is an FBAR?
From the IRS website’s page on FBAR:
Every year, under the law known as the Bank Secrecy Act, you must report certain foreign financial accounts, such as bank accounts, brokerage accounts and mutual funds, to the Treasury Department and keep certain records of those accounts. You report the accounts by filing a Report of Foreign Bank and Financial Accounts (FBA.
Who Must File: US persons must file an FBAR if, at any time over the calendar year, the total value of your foreign accounts exceeds $10,000.
When to File: The FBAR is an annual report, due April 15 following the calendar year reported. You’re allowed an automatic extension to October 15.
How to File: You must file the FBAR electronically through the Financial Crimes Enforcement Network’s BSA E-Filing System.
Penalties: A Non-Willful Violation has a maximum penalty of $12,921. So, with that large of a penalty – it’s definitely beneficial to file!
Back to the question at hand
Now that we know about FBARs, the question is: If I hold MXN within a Wise (formerly Transferwise) multi-currency account, do I have to file a FBAR?
I reached out to Wise, inquiring about where my Mexican pesos are actually stored.
They said: “Your MXN balance is held in a non-US bank account.”
Which means that Yes, I have to report that via an FBAR. (as I had more than the equivalent of $10,000 USD in that account last year)
We’ve been transferring dollars to pesos over the past year in order to build our house, so we will be filing an FBAR and reporting the money that we held in Wise. We did file an FBAR last year as well, as we had money in a foreign escrow company, so that we could buy our land.
Taxes
Don’t worry – this doesn’t mean you have to pay taxes on this money – it’s purely a reporting thing.
What about Fideicomisos?
If you have a Fideicomiso (a common Mexican land trust here in Quintana Roo) – do I have to report that via a FBAR?
In short: No, you don’t.
For more information on this, check out a recent video that was done by Two Expats Mexico. Paul goes into much more detail about this.
Additional Expat Tax information
For additional ways to save on your taxes, check out
Wrap Up
In short, if you held more than the equivalent of $10,000 USD in your Wise multi-currency account (or any other foreign account), then you need to file an FBAR. It’s not that hard, doesn’t cost you anything, and keeps the IRS and FinCEN happy.
Credits
- Taxes Photo by Kelly Sikkema on Unsplash