Under current FinCEN regulations, a foreign account holding virtual currency is not reportable on the FBAR. However, FinCEN in its FinCEN Notice 2020-2
, proposes amending reports of foreign financial accounts (FBAR) regulations to include virtual currency accounts as a type of reportable account.
FATCA requires foreign financial accounts reporting as well. For individuals, FATCA applies to all “foreign financial assets” that exceed the statute’s reporting thresholds. Reporting thresholds vary based on whether you file a joint income tax return or live abroad and marital status You are considered to live abroad if you are a U.S. citizen whose tax home is in a foreign country, and you have been present in a foreign country or countries for at least 330 days out of a consecutive 12-month period.
Although virtual currency accounts do not currently qualify as foreign financial accounts under the BSA (they may qualify soon) – virtual currencies held offshore may qualify as reportable foreign financial assets under FATCA because of IRS virtual currency reporting proposals .
US taxpayers who inadvertently fail to meet their reporting obligations as well as US taxpayers that are not able to certify “non-willfulness” may have options to come into compliance. US Taxpayer’s Offshore Compliance Options currently include:
- IRS Criminal Investigation Voluntary Disclosure Practice
- Streamlined Filing Compliance Procedures
- Delinquent FBAR Submission Procedures
IRS has stated that Taxpayers must understand their obligations involving virtual currency and that it will take steps to ensure fair enforcement of the tax laws against those who do not follow the rules involving virtual currency.
If you are out of tax compliance, do not wait to come forward.
There are options available for non-compliant Taxpayers if the IRS does not contact you first.
Consult a specialized Tax Advisor for your best option now.