Introduction
For U.S. taxpayers holding significant foreign financial assets, the IRS requires disclosure under FATCA (Foreign Account Tax Compliance Act) and FBAR (Foreign Bank Account Report) regulations.
Although cryptocurrency is not explicitly mentioned in IRS Form 8938 (FATCA reporting) or FBAR, the IRS is increasing enforcement of crypto-related foreign asset reporting.
This article explains:
- When U.S. taxpayers must report crypto holdings on Form 8938 or FBAR.
- Penalties for failing to disclose foreign cryptocurrency assets.
- Best practices for compliance with IRS regulations.
IRS Foreign Asset Reporting Requirements
1. IRS Form 8938 (FATCA Reporting)
- U.S. taxpayers with foreign financial assets exceeding $50,000 ($100,000 for joint filers) must file Form 8938.
- The IRS has not explicitly included crypto on Form 8938, but if digital assets are held on a foreign exchange, they may be considered reportable foreign assets.
2. FBAR (FinCEN Form 114) – Foreign Bank Account Reporting
- If a U.S. taxpayer holds more than $10,000 in foreign accounts at any time, they must file an FBAR.
- The IRS has not explicitly classified crypto wallets as FBAR-reportable. However, crypto held in foreign financial accounts (e.g., foreign exchanges) may trigger FBAR requirements.
When Does Crypto Require IRS Foreign Asset Reporting?
- Crypto held on foreign exchanges (Binance, KuCoin, Bitstamp) → May require Form 8938 & FBAR reporting.
- Crypto held in private wallets (Ledger, MetaMask, Trust Wallet) → Unclear, but currently not reportable.
- Crypto held in U.S.-based exchanges (Coinbase, Kraken, Gemini) → Not reportable on Form 8938 or FBAR.
Penalties for Non-Compliance
- Failure to file Form 8938: $10,000 penalty, increasing up to $50,000 for continued non-compliance.
- Failure to file FBAR: Penalties range from $10,000 (non-willful violations) to $100,000+ (willful violations).
- Criminal charges for tax evasion may apply for deliberate non-reporting.
Best Practices for Compliance
- Determine if your crypto is stored in a foreign financial institution.
- Keep records of exchange accounts and wallet holdings.
- If unsure, file Form 8938 and FBAR to avoid penalties.
Conclusion
The IRS has not fully clarified whether cryptocurrency must be reported on Form 8938 and FBAR, but foreign-held crypto may still trigger disclosure obligations.
To avoid steep penalties, U.S. taxpayers should track their crypto holdings and consult a tax professional.
If you have any questions or require further assistance, our team at Block3 Finance can help you.
Please contact us by email at inquiry@block3finance.com or by phone at 1-877-804-1888 to schedule a FREE initial consultation appointment.
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