BITCOIN TAX BULLETIN: 2014 FOREIGN BANK ACCOUNT REPORT
JUNE 23, 2015
Did you purchase or sell Bitcoin on a non-US exchange in 2014? You may need to file a 2014 Foreign Bank Account Report (FBAR).
The FBAR is required when the aggregate value of all foreign accounts exceeds $10,000 at any time during the year. The FBAR regulations apply to individuals as well as legal entities such as a limited liability company, corporation, partnership, trust, and estate.
The 2014 FBAR is due June 30, 2015, and the deadline cannot be extended. Penalties for not filing the FBAR begin at $10,000.
The IRS has stated that Bitcoin and virtual currency does not need to be reported on the 2014 FBAR.
However, cash fiat currency should be reported if held in a foreign account. The definition of foreign account is quite broad:
A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund.
The definition of “foreign account” is thus broad enough to include accounts held with a non-US Bitcoin exchange or similar accounts.
Therefore, cash fiat currency held in a non-US Bitcoin exchange should be reported on the FBAR if the aggregate value exceeds $10,000.
Below are examples of holding fiat currency in a Bitcoin exchange:
1. Wiring money to a non-US exchange.
2. Exchanging Bitcoin for USD or other fiat currency within the account at a non-US exchange.
If you have any questions, please feel free to contact us.
Daniel Winters, M.S. Taxation, M.B.A.