Last Updated: November 16, 2019
Update: On November 13, 2019, Carole House from FinCEN confirmed at AICPA in Washington DC that FBAR is not required for cryptocurrency. The following day Don Fort, IRS Chief of Criminal Investigations confirmed that FATCA is also not required for cryptocurrency. Therefore, currently, there are no foreign tax filing requirements specifically for cryptocurrency.
Original Article (out-of-date)
Foreign tax filing requirements are one of the most often overlooked compliance items by cryptocurrency taxpayers. These are actually some of the most important forms to ensure US taxpayers get right, because a misstep can result in hefty fines and significant jail time. In this post we’ll explain the various foreign filing requirements: Report of Foreign Bank and Financial Accounts (FBAR) & Foreign Account Tax Compliance Act (FATCA), and how CoinTracker can help you be compliant with them.
What the F … BAR?
American taxpayers who have a financial interest in or signature authority over foreign financial accounts must file an FBAR (aka FinCEN Form 114) if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. Foreign financials accounts may include crypto assets held in overseas exchanges such as Binance, Bitfinex, BitMEX, etc. in addition to foreign traditional bank accounts. Domestic exchanges such as Coinbase, Gemini, and Kraken are not included for FBAR reporting.
For example, at any time during 2019, even if for five minutes, you had cryptocurrency worth $11,000 in Binance.com, you have a FBAR filing obligation. This can also be spread across multiple accounts (e.g. $2,500 in USDT on Binance.com, $2,500 in BTC on Binance.com, $3,000 on Bitfinex and $4,000 in JPY in a Japanese Bank). Since the aggregate value of all foreign accounts (crypto and fiat) are more than $10,000, all four accounts will be subject to the FBAR filing requirement.
The good news is that FBARs have nothing to do with paying taxes: it is simply about disclosure. If you fail to correctly file your FBAR, you are subject to a $10,000 penalty per violation.
How to Comply with FBAR for Cryptocurrency
2. File FinCEN Form 114 through the BSA e-filing system (or your tax software)
Addresses of Foreign Cryptocurrency Exchanges
To make your life easier, we have tabulated the addresses of common foreign exchanges to the best of our ability:
Bibox Group Holdings Limited
Vistra Corporate Services Centre
Wickhams Cay II, Road Town, Tortola
British Virgin Islands
Binance (not Binance US): https://www.binance.com
Binance Europe Services Limited
Melita Court, Level 3
Triq Giuseppe Cali, Ta’Xbiex
1308 Bank of America Tower, 13/F
12 Harcourt Road, Central
Capital City, 2nd Floor
Independence Avenue P.O. Box 1008
5 New Street Square
London EC4A 3TW
BTC Markets: https://www.btcmarkets.net
179 Queen Street
Suite 3, Level 8
One Canada Square
Canary Wharf, London
114 William Street
Cryptopia (Closed as of May 15, 2019): https://www.cryptopia.co.nz
P.O. Box 31119
Grand Pavilion, Hibiscus Way
802 West Bay Road
Grand Cayman KY1-1205
Hit Solution Limited
Unit 19, 7/F
One Midtown No.11
Hoi Shing Road,
Tsuen Wan, New Territories
Huobi Global (not Huobi.com): https://www.hbg.com
Asia Square Tower 1
8 Marina View
Central Business District, 018961
20 Science Park Road
Liqui (shut down on January 28, 2019): https://liqui.io
Unit 10-02, Level 10
Menara Binjai No.2
Jalan Binjai, 50450
Kuala Lumpur, Malaysia
QuadrigaCX (shut down on January 28, 2019): https://quadrigacx.com
46-1881 Steeles Avenue
West Toronto, ON M3H0A1
Note: On Part II of FinCEN Form 114, you are required to provide basic information about your overseas crypto exchanges. Unfortunately many foreign cryptocurrency exchanges make it extremely difficult to find their physical addresses. In these cases, it is acceptable to print “unknown” in the Mailing Address, City, State, Foreign postal code, and Country fields. Additionally, many of them do not provide a formal account number, so you can simply enter “0001” as a placeholder. What matters is that you are making reasonable attempts at voluntarily coming forward and disclosing your foreign holdings.
Is FBAR required for Cryptocurrency Holders?
The AICPA Virtual Currency Task Force reached out to the Treasury’s Financial Crimes Enforcement Network (FinCEN) to help practitioners understand whether FBAR filing requirements apply to US cryptocurrency holders. FinCEN responded that regulations (31 C.F.R. §1010.350(c)) do not define virtual currency held in an offshore account as a type of reportable account. Therefore, virtual currency is not required to be reported on the FBAR (at least for now). This may change in the future, especially considering the influx of stable coins, so practitioners should stay abreast on this topic. FinCEN did tell the task force:
“in consultation with the IRS, continue[s] to evaluate the value of incorporating virtual currency held offshore into the FBAR regulatory reporting requirements.”
Absent this clarity, the conservative approach would be just filing the FBAR because it is easy, quick, and no tax is owed as part of this filing.
How to Comply with FATCA for Cryptocurrency
FATCA stands for Foreign Accounts Tax Compliance Act. In order to comply with this act, you may also have to file IRS Form 8938 (in addition to the FBAR). Your filing requirement may vary depending on your filing status, thresholds and other criteria. However, the general rule is that if you have assets (including cryptocurrencies) in a foreign exchange and the total value of those assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the year, you may have a filing obligation. Here is a comparison of the filing requirements for FBAR and FATCA.
How CoinTracker Can Help You with Foreign Tax Filing
Cryptocurrencies can be highly volatile so it is extremely difficult to manually track the highest USD fair market value in ever foreign exchange in any given year for every coin in a taxpayer’s portfolio. Luckily, CoinTracker automatically calculates the maximum value and end of year value of each of your foreign cryptocurrency accounts under the “Foreign Accounts” section of the Tax Page (with a Trader or higher tax plan). You can use this information to complete FinCEN Form 114 (FBAR) and FATCA.
Questions or comments? Reach out to us @cointracker
Disclaimer: this article is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.