- 1 Cryptocurrency & Bitcoin Lawyers Golding & Golding, A PLC
- 2 5 Quick Facts About Reporting Cryptocurrency
- 3 The IRS has increased Cryptocurrency/Bitcoin Enforcement
- 4 FBAR & Cryptocurrency/Bitcoin
- 5 FATCA & Cryptocurrency/Bitcoin
- 6 Exchanging and Transferring Crypto to the U.S.
- 7 Stolen Crypto is Still Reportable
- 8 Interested in IRS Bitcoin/Cryptocurrency Amnesty?
5 Quick Facts for IRS Reporting of Foreign Cryptocurrency & Bitcoin
(We use Bitcoin and Crypto interchangeably for purposes of this article)
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Cryptocurrency & Bitcoin Lawyers Golding & Golding, A PLC
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5 Quick Facts About Reporting Cryptocurrency
Here are 5 important considerations when deciding to report cryptocurrency/bitcoin:
The IRS has increased Cryptocurrency/Bitcoin Enforcement
Whether it is because the IRS finally won its subpoena against Coinbase (to gather the name of 14,000 U.S. account holders), the recent issuance of IRS Letter 6174/6174-A, or the IRS’ recent joining of J-5, which is focused on the global crackdown on cryptocurrency fraud (and related offshore fraud) – the IRS has made cryptocurrency an enforcement priority.
FBAR & Cryptocurrency/Bitcoin
While FinCEN recently stated that offshore Cryptocurrency is not listed as a type of account which is included in the regulations that dictates reporting (ambiguous at best), that does not mean all cryptocurrency would escape reporting.
For example, if you have a bank account with both non-virtual currency and Crypto, and/or exchanged your crypto for U.S. dollars or other non-virtual currency — you may still have to report the account on the FBAR.
FATCA & Cryptocurrency/Bitcoin
The IRS does not deem cryptocurrency as currency. Rather, the IRS categorizes it as property. Since it is considered property, it may be categorized as an “asset.” If your cryptocurrency is held in a foreign country account (not a personal wallet), then it may be considered a specified foreign financial asset that should be included on the FATCA Form 8938.
**FinCEN and the IRS are not the same, and oftentimes the guidance from one organization is not in sync with the other — leading to ambiguity (and making your reporting that much harder.)
Exchanging and Transferring Crypto to the U.S.
If you own cryptocurrency in a foreign country, at some point you may decide to sell it. Once you sell it, the currency will be held in USD, GBP, EURO, etc.
And, you may also decide to transfer the money to the U.S., or have a check issued, and then deposit the check in the U.S.
Either way, you have created footprints that the IRS may be able to follow.
And, with International wire transfer audits on the rise, this is something to be cognizant of.
Stolen Crypto is Still Reportable
Here is an example of the concern: You have $500K of crypto in Brazil. The crypto is in a joint account with non-virtual currency, and therefore the account may be reportable. Your crypto is stolen, and then you were audited by the IRS (not a good year).
If the IRS finds that the account was a reportable account, and you did not report, you may be subject to penalties based on the maximum value of the account — even if the cryptocurrency was stolen.
Interested in IRS Bitcoin/Cryptocurrency Amnesty?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in IRS Offshore/Foreign amnesty procedures. Contact our firm today for assistance with getting compliant.
For more information, please refer to a recent Forbes article on foreign cryptocurrency featuring Managing Partner, Mr. Golding
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.