Crypto Investors Need Not Worry: Cryptocurrencies Not FBAR Reportable At Least For Now

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Is virtual currency (crypto) reportable in respect of FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)? The value of fiat currency like the US dollar and other assets held by foreign institutions (FFI) on behalf of the taxpayer is reportable on Form 114 if the aggregate value of all offshore accounts exceeds $10,000 at any point during the tax year.

According to journalofaccountancy.com, virtual currencies are tough to classify. Virtual currencies have fluid properties. Sometimes it is a medium of exchange, sometimes it is a store of value, sometimes it is a 1:1 peg to fiat currency (stable coins), or it has several of these properties simultaneously. This is typical for almost all technology as we go from gray areas to clarity.

 

 

The question is whether wallets – which are free downloadable software – constitute a reportable account? When a taxpayer uses a third-party foreign exchange to trade virtual currency, the exchange is similar to an FFI, but there is uncertainty whether the customer account is reportable for FBAR purposes.

The AICPA Virtual Currency Task Force posed this question to the Treasury’s Financial Crimes Enforcement Network (FinCEN). FinCEN responded in the negative: regulations do not define virtual currency held in an offshore account as a type of reportable account.

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Hence virtual currency is not reportable on the FBAR.  This answer remains in flux, though, and it could change over time. FinCEN remains in consultation with the IRS in this respect, and they continually evaluate the value of incorporating virtual currency held offshore into FBAR regulatory reporting requirements.  Some say the conservative approach would be to file for FBAR.

Also, a US taxpayer can have US dollars on a third-party foreign exchange in addition to virtual currency. Hence the dollar amount should be reported. Remember that the IRS administers FACTA and Form 8938, Statement of Specified Foreign Financial Assets, compliance; while the reporting is similar, this article applies only to FBAR.

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Tax Planning For Cryptocurrency U.S. Investors

Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intended for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services.  This article cannot serve as a substitute for such professional services or advice.  Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation.  This article is subject to change at any time and for any reason.

If you would like to benefit from our expertise in these areas, or if you have further questions on this advisory, don’t estimate to contact our specialists or call us 786 462 7899.

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Fulton Abraham Sanchez, CPA

Fulton Abraham Sánchez, CPA I am Certified Public Accountant, specialized in Tax Planning & Offshore Strategies for Real Estate, Hedge/Equity Funds, Fintech, Crypto, Expats, IRS Debt Resolution. You can email me fa@fascpaconsultants.com and follow us on Facebook : FAS CPA & Consultants.

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