Before you start

An SSN or ITIN
Form W-4 with your employer for federal withholding
California Form DE 4 for state withholding
Records of any Mexican accounts, property or income

Step-by-step

1
Complete the W-4 and DE 4 on day one
These set your federal and California withholding. California uses its own DE 4, and the defaults can under-withhold badly for a two-income household.
Via employerWho: YouFirst week of employment
2
Determine your US tax residency
The substantial presence test counts weighted days over three years. If you live in Tijuana and work in San Diego, the day count still applies — physical presence in the US on working days counts, and people crossing daily accumulate days quickly.
OnlineWho: You
3
Check the US–Mexico tax treaty if you have cross-border income
The treaty allocates taxing rights and provides relief from double taxation, but benefits are claimed rather than automatic. If you have Mexican salary, rental income or investments, this is not a do-it-yourself first year.
OnlineWho: You
4
File federal and California returns by 15 April
The tax year is the calendar year. Note that California does not follow federal tax treaties, so treaty-exempt income can still be taxable by the state.
OnlineWho: YouBy 15 April annually
5
File an FBAR if foreign accounts exceed $10,000
Aggregate foreign account balances over $10,000 at any point in the year trigger a FinCEN filing, separate from your return. A Mexican bank account used for rent or family support is enough to cross it, and in this city that is extremely common.
OnlineWho: You
6
Declare currency over $10,000 at the border
Carrying more than $10,000 in cash or monetary instruments across the border in either direction must be reported to CBP. Failure to declare means seizure, and it happens at San Ysidro regularly. This is separate from any tax obligation.
In personWho: You

Documents you’ll need

Form W-2 from each employer, issued by 31 January
Form 1099s for freelance, interest and investment income
Mexican account statements and any Mexican income records
Passport and crossing history for the substantial presence day count
FinCEN Form 114 (FBAR), if applicable

Things most newcomers don’t know

Living in Tijuana does not necessarily make you a Mexican tax resident for US purposes.

The substantial presence test counts days physically present in the United States. Someone crossing to work five days a week accumulates US days rapidly and can be a US tax resident on worldwide income while living in Mexico. The treaty has tie-breaker rules, but they must be claimed. This is the single most consequential misunderstanding in the cross-border community.

Source: IRS — substantial presence test

A Mexican bank account triggers the FBAR, and almost everyone here has one.

Aggregate foreign account balances over $10,000 at any point in the year require a FinCEN filing. An account used to pay Tijuana rent or support family easily crosses it. The form takes fifteen minutes; the penalty for missing it does not fit the offence.

Source: IRS — report of foreign bank and financial accounts

California does not honour federal tax treaties.

Income exempted federally by the US–Mexico treaty is generally still taxable by California. Cross-border workers who correctly claim treaty relief on the federal return are routinely surprised by a state bill on the same income.

Source: California Franchise Tax Board — nonresidents and part-year residents

Carrying over $10,000 across the border must be declared.

CBP requires a report for cash and monetary instruments above $10,000 in either direction, and it is aggregate across a family travelling together. Undeclared money is seized, and the process to recover it is long. This catches people moving savings after a house sale.

Source: US Customs and Border Protection — currency reporting

Common mistakes to avoid

Assuming living in Mexico removes US tax residency when you cross to work daily.
Missing the FBAR on a Mexican account used for rent or family support.
Assuming a federal treaty exemption also applies to California — it does not.
Carrying more than $10,000 across the border without declaring it.
Using a salary calculator that predates the uncapping of SDI on 1 January 2024.

Some of this may be out of date. Spotted something inaccurate? Help us keep it right for the next newcomer.