Are Cryptocurrencies Foreign Assets Subject to FATCA and FBAR?

January 13, 2023

People often ask: Do Bitcoin and other digital tokens qualify as foreign assets under U.S. law? Answer: Not inherently.

Cryptocurrency holders who use overseas wallets and exchanges may be subject to reporting requirements and should familiarize themselves with two tax forms: FATCA and FBAR.

Cryptocurrency as a Foreign Asset: Categorizing Tokens for Tax Purposes

For the purposes of tax assessments, the United States IRS treats cryptocurrencies as property with potential income tax and capital gain attributes. For its part, the Securities and Exchange Commission (SEC) treats most ICOs as financial securities that need to be registered or formally exempted.

And yes, if you trade or sell tokens (for fiat or other cryptocurrencies) at any point during a year, you must report it on your taxes and pay the appropriate capital gains.

For a better understanding of your cryptocurrency tax obligations, check out our complete Crypto Tax Guide!

FATCA: Foreign Account Tax Compliance Act

We’ve established that tokens traded and sold overseas may produce taxable income.  Additionally, using a foreign exchange may trigger reporting responsibilities laid out in the Foreign Account Tax Compliance Act.

FATCA requires foreign financial institutions to hand over banking information on accounts that:

  • Belong to a person born in the United States;
  • Have U.S. contact information;
  • Include transfer instructions to a stateside account;
  • Have a U.S. resident as power of attorney;
  • Have a U.S. resident as someone with signatory authority.

The United States then uses this information to check against tax reporting records. People who fail to disclose foreign funds or remit taxes on qualified income may find themselves on the IRS’ radar.

Learn more about FATCA Reporting (Form 8938).

FBAR: Foreign Bank Account Reporting

International cryptocurrency transactions may trigger reporting requirements, but you may not owe taxes on the money. However, if the aggregate of your foreign accounts exceeds $10,000 at any time during the year, you may be required to file an FBAR with Uncle Sam.

If you need help identifying whether or not you’re required to file FinCen Form 114, our FBAR lawyers can walk you through the process and make reporting your foreign income simple!

Connect with A Cryptocurrency Tax Attorney

Gordon Law Group remains a leader in the cryptocurrency industry. We work with businesses and investors around the world. Moreover, our crypto tax attorneys have the experience you need to remain both profitable and compliant.

If you’re unsure about your filing requirements, don’t wait. Give us a call at (847) 580-1279 today!

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