Do Cryptocurrency Investors Need to File an FBAR in 2023? (2024)

FAQs

Do Cryptocurrency Investors Need to File an FBAR in 2023? ›

Based on FinCEN's guidance, the only reason a U.S. taxpayer may have to include cryptocurrency on an FBAR in 2023 is if the cryptocurrency is held in an offshore account that also holds reportable assets.

As noted, the FBAR is required for US taxpayers with joint currency and crypto accounts worth over $10,000 at any point in the previous year. While this affects a relatively small number of cryptocurrency investors and businesses, the obligation to submit IRS Form 8938 has a broader scope.

The IRS requires foreign-held or -acquired cryptocurrency to be reported on Form 8938. While the filing threshold is higher for American expatriates, the need to file often applies to expats, especially.

Foreign Investment Accounts

The assets are not taxable in the foreign country, and the accounts are comprised primarily of stock and mutual funds. In this type of situation, Linda must report the foreign investment accounts on her annual FBAR.

Building on proposed regulations issued last year, the IRS recently increased its oversight of cryptocurrency transactions by requiring brokers, beginning in 2025, to report investor sales and exchanges in connection with such transactions.

FATCA Reporting

For FATCA purposes, cryptocurrency is generally considered a specified foreign financial asset. This means it may be reportable on Form 8938 if you meet the reporting thresholds[3].

MSBs that engage in virtual currency activities are defined as money transmitters and must register with FinCEN as MSBs and comply with all relevant AML/CFT regulations. Section 18 of the US federal law USC § 1960 prohibits conducting a money transfer business without a licence.

Form 8938 is only required to be filed in any tax year in which the Taxpayers are required to file a tax return. Thus, when a Taxpayer is not required to file a tax return, then they are not required to file a Form 8938.

What happens if I don't report cryptocurrency on my taxes? The IRS is perfectly clear crypto is taxed and failure to report crypto on your taxes may result in steep penalties. The punishments the IRS can levy against crypto tax evaders are steep as both tax evasion and tax fraud are federal offenses.

The IRS treats cryptocurrency as “property.” If you buy, sell or exchange cryptocurrency, you're likely on the hook for paying crypto taxes. Reporting your crypto activity requires using Form 1040 Schedule D as your crypto tax form to reconcile your capital gains and losses and Form 8949 if necessary.

How do I know if I need to file an FBAR? ›

A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. The full line item instructions are located at FBAR Line Item Instructions.

Disposed, sold, exchanged or transferred ownership of digital assets: For another digital asset. For U.S. dollars or other currency. In exchange or trade for property, goods or services in any amount.

Some cryptocurrency exchanges do not report user transactions to the IRS, including: Decentralized crypto exchanges (DEXs) like Uniswap and SushiSwap. Some peer-to-peer (P2P) platforms. Exchanges based outside the US that do not have a reporting obligation under US tax law.

Do you need to report taxes on Bitcoin you don't sell? If you buy Bitcoin, there's nothing to report until you sell. If you earned crypto through staking, a hard fork, an airdrop or via any method other than buying it, you'll likely need to report it, even if you haven't sold it.

That's right, when you make purchases using crypto, this counts as a taxable event you'll need to report on your tax forms just like selling a stock and using the resulting money to buy something. You'll need to keep track of all these transactions so you can determine your tax liability accurately on your tax return.

US taxpayers must report any profits or losses from trading cryptocurrency and any income earned from activities like mining or staking on tax return forms, such as Form 1040 or 8949. Not reporting can result in fines and penalties as high as $100,000 or more severe consequences, including up to five years in prison.

Therefore, if you have a US IP address and try to use foreign exchange to invest in cryptocurrencies, you would be banned from trading or even opening an account. This is due to the FinCEN regulations. Other security risks are also associated with using foreign exchanges in the US.