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taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 342
Experience:  Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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I have a situation I need to discus with you about my taxes

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I have a situation I need to discus with you about my taxes so I need to explain my personal background in the order to make clear my issue. I born in California Los Angeles in 1966 I come from a family which never was illegal in the USA and I proud to be American and I detest and reject any form of illegal practice. I never married. I have to move to Mexico from 2009 to the present because I could not found any job after I graduate from the university, but I still have an a legal address which is my brother's place in Illinois and in fact I still have my Illinois driver license. I have a wonderful family that always helping me in anything they can, but some times they might be misinformed.
My first question is: My uncle who runs a business in Mexico invite me to work with him; therefore, he helped me to issue an FM3 document. The situation is that he never pay me, and on each renovation of my work permit (FM3) he gave the constitutional letter of the business where I was working and a hiring letter where my uncle informed to INM (Instituto Nacional de Migracion) that I was working and receiving 20000 pesos per month. I believe that getting the FM3 was a big mistake because I could request an FM2 since I have relatives living in Mexico. Today FM3 become “Permiso de residente temporal” and I think the FM2 become “Permanente” I can not declare to IRS anything because I did not get paid or gain any income in all my stay in Mexico. It was OK for me because I was helping on taking care of my grandmother. But now, I started to be worried about my situation with IRS. How this situation will affect me with my taxes? Is this situation will create problem to my uncle?.
My second question is that my family will donate to me a property. How that will affect me with the IRS? I want to sell this property to have enough money to buy me a house in Illinois which is what I dream to do.
My third question is I want to buy products in USA, and sell them in Mexico how the taxation will work Do I have to pay taxes to “Hacienda” and the IRS?
Submitted: 7 months ago.
Category: Tax
Expert:  taxmanrog replied 7 months ago.

Welcome to Just Answers! Thank you for giving me the opportunity to assist you! I will do my best to help!

 

As a US citizen you are required to pay tax on your worldwide income. Since you are not earning anything in Mexico, you have no filing requirement. Your immigration status in Mexico is a different story. You would need to talk to an immigration lawyer in Mexico. I don't think that you are at any more risk than possibly being deported. Your uncle, on the other hand, is breaking the law when he gives the Mexican authorities the documents stating that you are working.

 

For your second question, your family can gift you a property. In order to properly address the tax situation, I need to know where this property is located, and are the current owners US citizens/resident aliens or not? From your point of view, in the US gifts are never taxable. When you sell it, the difference between what your relatives paid for it and what you sell it for is long term capital gains, and if you have no income, as you state, it would be taxed at 0% or 15%, depending on the amount of the gain.

 

For your third question, if you purchase inventory from the US, and sell it in Mexico, you are considered to be self-employed. You would report your sales, less the cost of items that you sold, less expenses that you incur, and pay income tax and self-employment tax on those earnings. If you are living in Mexico, you will be required to file and pay taxes in Mexico as well as the United States. If you live in Mexico and meet certain requirements under Internal Revenue Code §911 you can exclude up to $94k of income from taxation in the United States. And, you can use the tax you pay in Mexico to offset some of the US income tax (but not Self-Employment tax) that you might have.

 

I look forward to your reply so I can answer the second question! If you have any more, please ask as well!

 

Have a great week!

 

Roger

Customer: replied 7 months ago.

 


Thank you for your fast reply


The location where is the property is in Tlanepantla Mexico state, Street Bosques de veracruz #68 Postal code 54050 Santa Monica



With respect the last question Americans actually being double taxed, is that correct?

Expert:  taxmanrog replied 7 months ago.

Is the relative who owns the property have American citizenship or Mexican?

 

While you will report the income in both countries, Mexico will get the income tax, and the Mexican income tax will offset the US income tax, so income tax is paid in only one country. The Self-Employment tax is paid only to the US. So tax will be paid to both countries, but they are two different taxes - income (Mexico) and self-employment (USA).

 

Please let me know the citizenship of the person who owns the land in Mexico.

 

Thanks!

 

Roger

Customer: replied 7 months ago.

Yes my relative have Mexican citizenship only


 

Expert:  taxmanrog replied 7 months ago.

OK. For him, there are no US reporting requirements or US tax consequences for him giving you the property.

 

For you however, there may be reporting requirements. In general, a foreign gift is money or other property received by a U.S. person from a foreign person that the recipient treats as a gift or bequest and excludes from gross income. A "foreign person" is a nonresident alien individual or foreign corporation, partnership or estate. IF the value of this gift (the Mexico property) is more than US$100,000, you have to report the gift. This is an informational return only, and is filed with your US personal income tax return. The reporting of this gift has NO US tax consequences for the you as the recipient of the gift.

 

When you sell the property, your "basis" in the property is whatever the relative who gave it to you paid for it, plus any improvements that he made to it. The difference between what you sell it for and what your basis is will be considered long term capital gain. You will pay tax at either 0%, 15% or 20%, depending on your income when you sell it.

 

I hope this answers your questions! If you still have questions, feel free to ask! If my answer helps you, please rate me highly! I would appreciate it!

 

Again, thanks!

 

Have a great week!

 

Roger

taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 342
Experience: Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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