FinCEN Implications of Cryptocurrency Investments

FinCEN Implications of Cryptocurrency Investments

1. Foreign Cryptocurrency Accounts

• FBAR (Report of Foreign Bank and Financial Accounts): FinCEN does not currently require the reporting of cryptocurrency held directly in personal wallets. If cryptocurrency is held in a foreign financial account (e.g., a foreign exchange), FBAR reporting might apply if the aggregate value of all accounts exceeds $10,000 at any point during the year.
• FinCEN Form 114: Use this to report foreign accounts if applicable.

2. FATCA Reporting

• Form 8938 (Statement of Specified Foreign Financial Assets): FATCA requires reporting of foreign cryptocurrency accounts or custodial accounts if their value exceeds certain thresholds. Thresholds vary based on filing status and whether you reside abroad or in the U.S.

Contact the team at US Global Tax if you require any further information or assistance.

www.usglobaltax.com

Lance, [email protected]

Shalen in Australia, [email protected]

Daria in New Zealand, [email protected]

Potential Risks and Penalties

1.???? Failure to Report: Noncompliance with IRS or FinCEN requirements can result in significant penalties, including fines and interest. Intentional noncompliance may lead to criminal prosecution.

2.???? IRS Scrutiny: The IRS has increased enforcement on cryptocurrency transactions, including the use of subpoenas to obtain user information from crypto exchanges.

3.???? Misclassification of Transactions: Misreporting income or gains can lead to audits and additional tax liabilities.

Best Practices for Compliance

1.???? Use Crypto Tax Software: Tools like CoinTracker or Koinly can help track transactions and generate tax reports.

2.???? Work with a Tax Professional: Consult a CPA or tax advisor experienced in cryptocurrency taxation.

3.???? Keep Comprehensive Records: Maintain transaction details, including wallet addresses, timestamps, and exchange records.

4.???? Understand Foreign Reporting Obligations:

If holding cryptocurrency in foreign accounts, ensure compliance with FATCA and FBAR rules.