For 2019 You Will Not Have to report Vitural Currency held in an Offshore Account on Form 114 - This Rule May Change in the Future

For this year the FinCEN has stated: “Currently the FBAR (Form 114) regulations do not define virtual currency held in an offshore account as a type of reportable account. For this reason, at this time, virtual currency held in an offshore account is not reportable on the FBAR.” 

However for the future you need to follow this issue since the FINCEN position on virtual currency accounts is very likely to change at some point.

You can find FinCEN’s letter of January 22, 2020 in Appendix III of the Government Accountability Office report Virtual Currencies: Additional Information Reporting and Clarified Guidance Could Improve Tax Compliance .

We can help you with your Form 114 fiing, questions and other international and expat tax questions.  Email us at ddnelson@gmail.com and go to our website at www.taxmeless.com 

IRS VIRTUAL CURRENCY REPORTING ENFORCEMENT ACTIONS

The IRS has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.

"Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties," said IRS Commissioner Chuck Rettig. "The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations."

The IRS started sending the educational letters to taxpayers last week. By the end of August, more than 10,000 taxpayers will receive these letters. The names of these taxpayers were obtained through various ongoing IRS compliance efforts.

For taxpayers receiving an educational letter, there are three variations: Letter 6173, Letter 6174 or Letter 6174-A, all three versions strive to help taxpayers understand their tax and filing obligations and how to correct past errors.

Taxpayers are pointed to appropriate information on www.irs.gov, including which forms and schedules to use and where to send them.

Last year the IRS announced a Virtual Currency Compliance campaign to address tax noncompliance related to the use of virtual currency through outreach and examinations of taxpayers. The IRS will remain actively engaged in addressing non-compliance related to virtual currency transactions through a variety of efforts, ranging from taxpayer education to audits to criminal investigations.

Virtual currency is an ongoing focus area for IRS Criminal Investigation.

IRS Notice 2014-21 states that virtual currency is property for federal tax purposes and provides guidance on how general federal tax principles apply to virtual currency transactions. Compliance efforts follow these general tax principles. The IRS will continue to consider and solicit taxpayer and practitioner feedback in education efforts and future guidance.

The IRS anticipates issuing additional legal guidance in this area in the near future. Taxpayers who do not properly report the income tax consequences of virtual currency transactions are, when appropriate, liable for tax, penalties and interest. In some cases, taxpayers could be subject to criminal prosecution.

Article from the TaxBook

Need legal or tax assistance with your vitural currency matters. Email us here.  Visit our website at www.taxmeless.com  We are attorneys and CPAs who specialize in International, Expatriate and Nonresident US taxation.

Are Virtual Currencies such as Bitcoin reportable on FBAR forms (form 114)? - the answer is sometimes yes.

The IRS does not consider virtual currencies such as BItcoin to be the same as cash or money. They consider it to be an asset to be treated for tax purposes much like stock, when purchased, sold or held as an investment.

There are certain situations however when virtual currency is reportable the same as a foreign bank account on the FBAR form 114 which is used to report foreign bank and financial accounts.  Failure to file this form each year can result in penalties of $10,000 or more. There are many reported court cases where the penalties for failing to file this form have resulted in penalties to one taxpayer of many hundreds of dollars or more.

Read more about the rules for reporting your virtual currency  - when to do it and when not -to the IRS HERE.

If you have not been filing this form and think you may be required to do so, and want to avoid the high penalties, need assistance or have questions CONTACT US.  We are CPAs and attorneys that have combined experience of over 60 years with US International Taxation.

IRS Announces How to Handle your BITCOIN for US tax Purposes

The Internal Revenue Service has  issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as Bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.

In some environments, virtual currency operates like “real” currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any jurisdiction.

The notice provides that virtual currency is treated as property for U.S. federal tax purposes.  General tax principles that apply to property transactions apply to transactions using virtual currency.  Among other things, this means that:

• • Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
• • Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.  Normally, payers must issue Form 1099.
• • The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
• • A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property. 

Further details, including a set of 16 questions and answers, are in Notice 2014-21, posted today on IRS.gov.