Do I have to file an FBAR FinCEN Form 114 for cryptocurrency?

[GaryB007]

I have seen yes and no on other sites.  The gov't doesn't really say you have to.

[ToddL99 · Accepted solution]

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 

[RossAngelos]

Hello @ToddL99 , the source you posted is different from what you are saying. You are saying that FBAR is required for cryptocurrency. However, in the article you linked, it says: under the current FinCEN guidance, cryptocurrency users are not required to comply with FBAR requirements and disclose their overseas crypto asset holdings.

Looking into notice FinCEN Notice 2020-2 (that is described in that article), it says: 

For that reason, at this time, a foreign account holding virtual currency is not reportable on the FBAR (unless it is a reportable account under 31 C.F.R. 1010.350 because it holds reportable assets besides virtual currency).

Looking into case you posted - United States v. Hom , it's actually not related to this topic. At least I didn't see that case mentioned "cryptocurrency" anywhere. 

Can you please explain this?

[ThomasM125]

@RossAngelos It is my understanding that at the current time you are not required to report cryptocurrency holdings on the FBAR return, but that is open to interpretation and may well be changed in the near future. I think what @ToddL99 is saying is that there are substantial penalties for getting this wrong, so since there is not a tax due with the FBAR return, it is better to complete it to be safe rather than sorry.

[RossAngelos]

@ThomasM125  Thanks for your input. That makes total sense.