You are strongly advised to comply with FBAR FinCEN 114 reporting requirements for your foreign-based cryptocurrency accounts.
Consider this carefully - the IRS has already taken steps to require FBAR reporting of foreign-based cryptocurrency account. The penalties for failure to report under FBAR FinCEN 114 rules are severe. And, if you were not already aware, many recent changes to tax law and regulations have been imposed retroactively.
If you have or had more than $10,000 in a foreign Cryptocurrency exchange any time during the year, it is precautious to file an FBAR to disclose the same.
This requirement has already been tested in court. In United States v. Hom the court upheld the requirement to file an FBAR. This means that you will be subject to a substantial penalty if you fail to file an FBAR.
What if the IRS comes calling?
Thus far the IRS has resorted to imposing maximum FBAR willfulness civil penalties for those who attained adverse results during an IRS examination.
To put this into perspective:
- A willfulness penalty is the greater of $100,000 OR 50% of the balance in the foreign account at the time of the violation.
- A non-willful violation leads to a maximum penalty of $10,000.
See FBAR Filing Basics for a detailed discussion of this issue.
Also see Cryptocurrency May Be Subject To FBAR Reporting Soon
