Cozumel News January 24h, 2017, Cozumel Students Campaign for Peace, U.S. Expat Taxes – The Basics, Prepaid Vs. Cell phone plan in Cozumel; What costs more, Aurita’s Cozumel Corner: Update on Playa del Carmen and Cancun, Cozumel Carnaval 2017 Pre-Carnaval, Cozumel 2017 Carnaval Schedule, Cozumel Ladies Breakfast, Cozumel English Language Worship Services, Cozumel’s Protected Animals and Cozumel Emergency Numbers.
Cozumel Students Campaign for Peace
Students from public and private schools supported by teachers and parents, began a campaign to peacefully demonstrate against violence. The campaign, under the slogan “Make your mark for peace”, concentrated on the intersection of the avenues 11 and 65, one of the most popular and busiest in the city, carrying banners and legends expressing their Rejection of violence.
The Cozumel students went out on Saturday to the streets of the city to distribute flyers with images of colored hands to motorists. Ariana Gutierrez, one of the students who participated, explained that the idea arose after the unfortunate events in which unknown people attacked a nightclub in Playa del Carmen and days later another group of armed subjects did the same to security facilities in Cancun.
The kids invited motorists to descend from their vehicles to paint their hands with the color of their choice and stamp them on a white background on a wall. Property owners of the walls had given prior approval for use in the campaign.
Gonzalez Franco Alcérreca, explained that this activity was carried out only where they were authorized and announced that the campaign received an excellent response, as people of all ages and walks of life joined the demonstration in favor of peace and against violence.
US Expat Taxes – The Basics
There is a lot of confusion among US expats (both new and long-standing) on the topic of taxes. Often times, the information available online and elsewhere is hard-to-understand, and/or addresses a very specific topic. The purpose of this article is to paint a broad picture, highlighting the most important factors to consider when filing US tax returns as an expatriate living abroad.
Filing Requirement
The United States has a highly stringent policy when it comes to the taxation of its citizens and permanent residents (i.e., those with a green card). The US government taxes all of its citizens based on worldwide income, which means it does not matter where the money is earned. Many Americans, especially dual citizens, are surprised when they learn this fact.
The filing requirement kicks in at specific thresholds (based on filing status). The table below identifies the thresholds for 2016.
Filing Status Threshold (Age Under 65) Threshold (Age 65 or Older)
Single $10,350 $11,900
Head of Household $13,350 $14,900
Married Filing Jointly $20,700 (both spouses under 65) $23,200 (both spouses 65 or older)
Married Filing Separately $4,050 $4,050
For self-employed individuals, the above thresholds do not apply. They are required to file a US tax return when net earnings reach a meager $400. Furthermore, individuals with businesses established outside the US have other informational filing requirements (discussed below).
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Foreign Income Exclusion
US citizens and permanent residents may be able to exclude up to $100,800 in foreign earned income provided they meet certain qualifications. Foreign earned income is based on where the work is conducted, and not determined by location of employer, nor where the payment for services take place. For married couples, the foreign earned income exclusion can be utilized separately by each spouse. Given the high exclusion amount, most US expats end up not owing any taxes, although they are required to file a tax return. For the first year living abroad, the application of the foreign earned income exclusion requires a certain pro-rated calculation (based on days outside the US).
In countries with a higher income tax rate than in the US, it is often preferable to utilize the foreign tax credit, rather than the foreign earned income exclusion to eliminate US tax liability. The foreign tax credit addresses the issue of double taxation. Amounts paid to a foreign government directly offsets any US tax amounts. An attractive feature of the foreign tax credit is that unused foreign tax credits can be carried forward up to 10 years.
The foreign tax credit is income category specific, which means that foreign taxes paid on earned income will only offset the US tax liability on earned income. Foreign taxes paid on passive income (e.g., investment income, bank interest, rental income) can only be applied toward the US tax liability on passive income.
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US Expats with Children
Many more US expats would file a tax return, if they knew about the Child Tax Credit. Basically, it is a gift from the IRS to those with moderate income. Families that qualify can receive a tax refund, without having paid any taxes. The Child Tax Credit is worth up to $1,000 per child under the age of 17. To claim the credit, one needs to have a social security number for each child.
Effective 2015, the rules changed such that when the foreign earned income exclusion is exercised on the tax return, the Child Tax Credit becomes inapplicable. A potential work-around is to file separate returns, with the lower-earning parent reporting the children on his/her tax return. Although this approach is somewhat more complicated, it preserves the child tax credit in many instances.
Albatros Charters
Fishing & Cruising Cozumel
Local Telephone in Cozumel: 987- 872-7904
Email: info@cozumel-fishing.com
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Foreign Financial Account
US persons (including entities) with an interest or signature authority over foreign financial accounts that have an aggregate balance exceeding $10,000 are required to file the FBAR (FinCen 114). Foreign financial accounts include: bank accounts, brokerage accounts, mutual funds, annuities, life insurance policies with cash value, and indirect interests in financial accounts through a foreign entity (if >50% ownership).
The FBAR is separate requirement from your tax return. The $10,000 aggregate balance threshold is at any point during the year, and not the year-end balance. Therefore, it is advisable to maintain records of your monthly account balances. Account balances need to be converted to U.S. dollars, using the F/X rate as of the last day of the year.
Failure to file the FBAR carries hefty penalties. Important to note, with the implementation of FATCA (Foreign Account Tax Compliance Act), foreign financial institutions are providing the IRS with the details of foreign financial accounts held by US persons. As a result, non-reporting is an increasingly risky proposition.
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Foreign Rental Property
Rental income from foreign properties should be reported on a US tax return. Aside from the worldwide income requirement, there is a practical reason for reporting. When a US expat sells a foreign property, he or she will typically deposit the proceeds in a foreign bank, or have the funds transferred to a US bank. If the proceeds are deposited in a foreign bank, the IRS will receive account-specific information (per the above discussion on FBAR). If the funds are transferred to the US, the bank may inquire about the nature of the money being deposited. With either scenario, there is risk of a “red flag” being generated within the IRS.
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Foreign Business
Many US expats start a business while living abroad. The IRS has a high level of interest in foreign businesses owned by US persons. That is because some Americans hide income and assets through foreign entities (i.e., tax evasion). There are strict reporting requirements. Severe penalties can apply if certain informational returns are not filed appropriately.
Given the complexity of the various reporting requirements, we will not go into any specifics in this article. However, some of the relevant IRS forms include: 5471 (foreign corporation), 8865 (foreign partnership), 8858 (foreign disregarded entity).
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Retirement Saving
Saving for retirement is an important consideration, regardless of where one lives. In the US, many Americans utilize tax-efficient vehicles to save for retirement (e.g., 401k plans, IRAs). Similarly, US expats should utilize tax-efficient vehicles to save for their retirement. Some tax planning is likely to be required to allow for contributions. For example, contributions to an IRA requires taxable income. For US expats utilizing the foreign earned income exclusion, they would need to calibrate the exclusion amount to create taxable income, thus allowing for an IRA contribution.
Social Security is a life-long pension that US expats should include in their plans for retirement. For low to modest income earners, what one receives during retirement can be far greater than the amount contributed. However, many US expats who moved abroad prior to qualifying for Social Security benefits find themselves in a difficult position. Fortunately, there are ways to contribute to Social Security while living abroad. Generally speaking, the easiest path is start a small business, and report the income on a tax return.
To qualify for Social Security, one needs to earn 40 credits. Find out whether you have qualified by visiting SSA.gov and creating an account. You will need to provide a US mailing address (usually the last one on record with the federal government).
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Mon- Saturday: 10:00 a.m. – 8 p.m.
Phone: 01 987 872 7632
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Filing Deadlines (2017)
US expats are given an automatic 2-month extension to file their tax returns. Therefore, the filing deadline is June 15, 2017. However, tax payments (if applicable) are due on April 17, which is the standard filing deadline. If one owes taxes, and files after April 17, interest charges will begin to accrue. Also, the failure-to-file penalty will kick in after the filing deadline. To avoid the failure-to-file penalty, many US expats request an additional extension (October 16, 2017). Effective 2016, the FBAR filing deadline coincides with the tax return (including extensions). For information on a wide range of tax-related topics, visit us at: holaexpat.com.
This article was written by John Ohe – IRS Enrolled Agent and CFA. John works at Hola Expat, which specializes in tax services for U.S. expats. If you would like to submit a question, email: info@holaexpat.com. Disclaimer: The facts provided in this article are for general information, and should not be construed as financial advice. Tax laws and regulations change frequently, and their application can vary widely based on the specific facts and circumstances involved.
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Prepaid Vs. Cell phone plan in Cozumel; What costs more
How much you spend on average for the use of your cellphone? Do you belong to the group of people who ‘run’ to the corner store to load your phone minute balance or do you pay a monthly invoice to a company such as Telcell or Telmex? Although in our State of Quintana Roo, the cell phone companies are usually on the list of companies with complaints to the PROFECO, you might find that paying for a telephone ‘plan’ to be more profitable. (PROFECO is Mexico’s consumer protection agency.)
Website newspaper, Excélsior, reported that in Mexico, users of prepaid telephones spend 42.4 percent more on their devices than users of postpaid telephones, according to Javier Medina y Radamés Camargo, analysts from The Competitive Intelligence Unit (The CIU).
In the third quarter of 2016, the Mexican mobile phone market accounted for 110.4 million lines, of which 83.1 percent are under prepaid and 16.9% under postpaid.
The experts observed that while the total number of mobile lines registered an annual increase of 5.2 percent, the postpaid mode has gained ground with a growth significantly higher than that of prepaid – of 11.3 percent versus 4.1 percent, respectively – in The last year, added CIU.
The agency indicates that historically, the prepay user was at a disadvantage compared to postpaid user because the latter receive better rates, subsidies on equipment and even a monthly bill to verify the use of its services. (The facture that businesses must use for tax purposes).
This gap increased during 2015, due to the aggressive reduction of prices recorded in rental plans, coupled with the offer of more services, which triggered the migration of users to this modality.
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Aurita’s Cozumel Corner
Welcome once again to The Cozumel Sun! I want to thank this week’s article contributor John Ohe, an IRS Enrolled Agent and CFA who works at Hola Expat. I want to take the opportunity to remind my readers that they are welcome to contribute articles. This publication is weekly, with daily news and information posted in our Facebook Page and Facebook Group of the same name.
Update on Playa del Carmen and Cancun: All has been quiet since last week. The incident in Playa seems isolated and Cancun’s problems seem internal between cartels and some members of the Government. From what I can tell, is business as usual and the cities are understandably campaigning to let the citizens and tourist know that they are safe. Have not heard if the curfew is still on for nighttime.
Last week I posted Emergency Numbers and Worship Services in English. I need reader input on additional church services, numbers for embassies not listed, other after hour Doctors, etc. I did not receive any input, so I am posting them again in this issue. Catholics, can someone find out when the English Mass is starting at San Miguel please? Those of us that live here have the information important to us, but visitors really need our help. Please help us help them!
Last, but very important, we have donated or sold at the fundraiser garage sale the majority of the second hand clothing and articles we collected in 2016. TCS’s On-Going Garage Sale will resume again next month, please consider dropping off or calling us to pick up your donations. Clothing, housewares, furniture, appliances, etc. will be greatly appreciated and guaranteed to go towards a family in need or proceeds from the sale to a good cause.
Cozumel Ladies Breakfast
Cozumel Ladies Breakfast for Wednesday January 25th, and February 1st at 9 a.m. at La Candela on the SW corner of Av 5 and Calle 6. We will be visiting here for Jan 18, 25 and Feb 1st. There are 2 parking lots on Av 5 north of the restaurant plus there is street parking further up towards Calle 8 & 10.
Our group meets every Wednesday. In addition to meeting wonderful Ladies from all over the world, the breakfast club is an excellent source of information gathering and networking. Breakfasts are informative and FUN! All Women are welcome to join us, even if you are just visiting our beautiful Island.
If you wish to be placed on the mailing list, contact: Betty Li at cozumel.ladies.breakfast@gmail.com
Cozumel Carnival 2017 and Pre-Carnaval Schedule
Cozumel English Language Worship Services
Ebenezer Presbyterian Church
30th Ave. at 10th Street North
Services in English every Sundays at 9 a.m.
San Miguel Catholic Church
Downtown Corner of Town Square
Mass in English to Resume this month
To be announced
Jesus es Rey Bible Church
Corner of Ave. 95 y Calle 39.
Services in English will be at 10 a.m.
CHABAD of Cozumel
5th Avenue between Juarez and first
Second Floor PLAZA DEL SOL close to the San Miguel Pier
US Phone +1 (305) 432-2406 or +1 (770) 666-5428
Mexico Cell Phone: +521 (987) 111-9715 or +521 (987) 117-9518
Kabbalat Shabbat Friday night: Sunset
If Your place of worship not listed? Please contact me with the information!
Cozumel Emergency Numbers
Emergency 911
24 Hour Doctor 872-0103
Dentist 872-0808
Hyperbaric Chamber 872-0103
Hyperbaric Chamber 872-3070
Police 872-0092
Red Cross 872-1058
Taxi Cab 872-0236
Taxi Cab 872-0041
U.S. Consulate 872-4574
U.S Consulate 872-6152
U.S. Consulate 044- 987-121-0323
Please send me your Consulate’s Number if other than US!
Corrections? Additions? Please Let me Know so I can share!
Cozumel’s Protected Animals
