Skip to content

u.s. expat tax guide – mexico

What if I’ve lived in Mexico for years without filing US taxes?

If you’re a US citizen living in Mexico and haven’t filed your US tax returns, you’re not alone, and there’s a way to get back on track.

The Streamlined Foreign Offshore Procedure helps expats catch up on missed tax filings without the usual heavy penalties. Even if you didn’t owe US taxes in the past, that doesn’t mean you didn’t need to file—US citizens must report all global income to the IRS, no matter where they live or work.

What steps should I take to fix unfiled tax returns?

If you’ve missed a few years of filing, the Streamlined Foreign Offshore Procedure is the best route if the IRS hasn’t contacted you yet. 

This process lets you file the last three years of tax returns and six years of FBARs (Foreign Bank Account Reports) without penalties, as long as your failure to file wasn’t intentional (also known as “non-willful” non-compliance). You’ll need to submit a statement explaining why you didn’t file on time.

How could the IRS find out I haven’t filed?

The IRS can find out through various systems, particularly FATCA (Foreign Account Tax Compliance Act), which requires foreign financial institutions to report accounts held by US citizens. 

If your bank in Mexico has been reporting your account to the IRS, you could already be on their radar without even knowing it. Catching up voluntarily with the IRS before they contact you is always the safest option.

What exactly does the Streamlined Foreign Offshore Procedure involve?

This process allows you to:

  • File the last three years of US tax returns.
  • Submit six years of FBARs (if applicable).
  • Provide a certification letter that explains why you didn’t file before and confirms that your non-compliance was non-willful. Once you complete these steps, you can resolve your tax situation and avoid penalties. It’s a smart way to clean up your tax history if you’ve unintentionally missed some filings.

Should I get professional help with the process?

Yes, especially for the certification statement. 

This document is crucial because it explains your non-compliance. It’s your chance to prove to the IRS that you didn’t intentionally avoid filing, so working with a tax professional can help ensure everything is accurate and properly documented.

Do I have to file returns for all the years I missed?

Typically, no. Even if you’ve been non-compliant for a decade or more, the Streamlined Procedure usually only requires you to file the last three years of tax returns and six years of FBARs. As long as the IRS hasn’t contacted you yet, this is a great option to get back into compliance without having to deal with more extensive back-filing.

Will I face penalties for filing late?

The whole point of the Streamlined Foreign Offshore Procedure is to help expats like you avoid penalties for late filing. While you might still owe interest on any unpaid taxes, the IRS will waive penalties that could otherwise be applied for both late tax returns and FBARs.

Can I still get stimulus payments while living in Mexico?

Yes, you can! Even if you haven’t filed US tax returns recently, once you submit them through the Streamlined Procedure, you can still claim stimulus payments from past US relief efforts. The IRS will process your eligibility based on your newly filed tax returns, so you won’t miss out.

How much could I receive from the third stimulus payment?

The third stimulus payment offers US$1,400 per person (including your spouse if filing jointly). However, your eligibility depends on your income in 2021. 

Single filers making less than US$75,000 or joint filers earning less than US$150,000 qualify for the full amount. If your income is higher, your payment will gradually decrease. Keep in mind you’ll need to file your tax return by April 2025 to claim this payment.

What happens if I don’t file FBARs?

The consequences of not filing FBARs can be severe, with penalties ranging from US$10,000 for non-willful violations to up to US$100,000 (or 50% of the account balance) for willful violations. 

FBAR is required if your combined foreign accounts exceed US$10,000 at any point during the year. Failing to report could lead to hefty fines, or even legal issues if the IRS sees it as willful neglect.

What are the penalties for not filing tax returns?

If you miss your filing deadline, the IRS imposes a penalty of 5% of unpaid taxes per month, capped at 25%

For returns that are over 60 days late, the minimum penalty is US$485 or 100% of the tax due, whichever is less. On top of that, there’s a 0.5% penalty per month for unpaid taxes, and interest builds up on any unpaid balance. The longer you wait, the more these penalties can add up, so it’s best to file as soon as possible.

How do I file my FBARs?

FBARs must be filed electronically through the Financial Crimes Enforcement Network (FinCEN). The deadline is April 15, but you automatically get an extension to October 15 if needed.

Table of contents