Be ready for 2018 tax reporting in 2019

CRYPTOCURRENCY
TAX REPORTING FOR
FBAR AND FATCA

Comprehensive overview of United States tax filing

obligations including FinCEN Form 114 and Form 8938

by
CRYPTOTAPAS.COM
WHAT’S
INSIDE
How to complete FinCEN Form 114, step-by-step guide

What is FBAR and FinCEN, and who is required to file?

What is FATCA and why should I care?

What is Form 8938 and who is required to file?

Quick glance summary of filing thresholds for FBAR and FATCA

Frequently Asked Questions (FAQ) covering most important

questions.

INFORMATIONAL PURPOSES ONLY. THIS DOCUMENT DOES NOT

CONTAIN ADVICE OF ANY KIND. PLEASE CONTACT A PROFESSIONAL
FOR ADVICE OF ANY KIND.
CRYPTOCURRENCY

REPORTING FOR FBAR

AND FATCA:

Comprehensive overview guide on FBAR

(FinCEN) and FATCA reporting obligations
for US tax residents

Many individuals who entered crypto space assume

anonymity. Early miners and traders may have

gotten partial anonymity but those who have started

buying, trading and transferring their first Bitcoin

and other cryptocurrencies were shaken up when

courts granted IRS to subpoena Coinbase to gather

taxpayer information from 2013 thru 2015.

We expect this trend to continue into 2018 tax year

(filing in 2019) where IRS may go back and request

information related to 2016 thru 2018.

If the only place you ever bought your

cryptocurrency is Coinbase or Gemini or Bittrex or

other US based exchanges and you held all of your

cryptocurrencies in these US based exchanges or

your private digital wallets (like Myetherwallet) –

then you are NOT subjected to FinCEN.

"Even if you are not subject to FBAR reporting,

you may still be subject to FATCA."

 
However, if you are among the 1000s of

individuals who held accounts with

Binance, KuCoin, Huobi or other non-US

exchanges then you may have FBAR

reporting.

What is FBAR and

FinCEN, and who is
required to file?
FBAR stands for Foreign Bank Account Reporting. 

This is an informational disclosure made to United

States Treasury on an annual basis on FinCEN

Form 114.

Who needs to file FinCEN Form

114?
Instructions say that “A United States person that has

financial interest or signatory authority over foreign financial

accounts must file an FBAR if the aggregate value of foreign

financial accounts exceeds $10,000 at any time during the

calendar year” FBAR is reported on FinCEN Form 114.

United States person includes US citizens, green card

holders and US tax residents.

Foreign Financial Account(s) includes financial account

located outside the US.  Please note that while the digital

wallets (like Myetherwallet) are not covered under the

definition of Foreign Financial Account, crypto exchanges

located outside US still falls into the definition of Foreign

Financial Account and is subjected to FinCEN Form 114

rules.

Aggregate value: In determining whether you have

FBAR reporting on FinCEN Form 114 depends on

aggregate value  of all of your accounts. Once you cross

the $10,000 aggregate balance you have to report ALL

Foreign Financial Accounts, irrespective of balances held

in individual foreign accounts.

Example: Let’s say, you have accounts with Binance,

KuCoin, Huobi as below.

Binance: Highest balance during calendar year 2018 - $4500

KuCoin: Highest balance during the calendar year 2018 - $1500

Huobi: Highest balance during the calendar year 2018 - $500

OkEX: Highest balance during the calendar year 2018 - $5000

Cryptopia.co.nz: Highest balance during the calendar year 2018 -

$50
Because the sum total of all the accounts together exceeds

$10,000 you will need to report ALL of your foreign

financial accounts.

How to file?

FinCEN Form 114 needs to be filed online and

cannot paper filed.

You have to go to BSA page and select the

appropriate account type (individual or

institution) and enter the information requested.

Select the appropriate account type (individual

or institution) and enter the information

requested.

Due date: FinCEN Form 114 is due by April 15 of filing

year (for 2018 calendar year , US tax returns are due on

April 15, 2019), however, if you timely extend your IRS

tax returns to October 15, 2019, your FinCEN Form 114

forms are due by October 15, 2019.          

IMPORTANT: Your FinCEN Form 114 is due by a

maximum extended due date of October 15. Even if your

federal tax returns are extended beyond October 15, such

extension beyond October 15 does not apply to FinCEN

Form 114
 What is FATCA
and why should
I care?

FATCA, Foreign Account Tax Compliance Act, was

enacted to avoid tax evasion by investing in offshore

financial accounts/assets. FATCA regulations cover the

following forms:

Form 3520, Annual Return To Report Transactions

With Foreign Trusts and Receipt of Certain Foreign

Gifts

Form 3520-A, Annual Information Return of Foreign

Trust With a U.S. Owner

Form 5471, Information Return of U.S. Persons With

Respect To Certain Foreign Corporations

 Form 8621, Information Return by a Shareholder of a

Passive Foreign Investment Company or Qualified

Electing Fund

Form 8865, Return of U.S. Persons With Respect to

Certain Foreign Partnerships

Form 8938, Statement of Specified Foreign Financial

Assets

We will confine our discussion to Form 8938, Statement of

Specified Foreign Financial Assets, in this document.

 Form 8938
Who needs to file Form 8938?

You can get the details here, however, keeping it

simple, a United States person who has any financial

account maintained by a foreign financial institution

(or holds stocks or securities in foreign entity) and

the aggregate value of such accounts is above the

filing thresholds must file Form 8938 along with their

Form 1040 tax returns..

W h o i s a U n i t e d S t a t e s p e r s o n f o r

F o r m 8 9 3 8 ?

Definition of United States person is same for Form 8938

as it was for FinCEN Form 114. A US citizen, green card

holder or US tax resident, all fall within the definition of

United States person.

W h a t a r e t h e f i l i n g t h r e s h o l d s

f o r F o r m 8 9 3 8 ?

Thresholds change based on your marital status and

where you live. Below table summarizes the Form 8938

filing thresholds.
D i f f e r e n c e b e t w e e n F B A R a n d

F A T C A

FinCEN Form 114 is part of FBAR filing with the United

States Treasury and Form 8938 needs to be filed with the

IRS tax forms. Both of these filings are based on threshold,

as we discussed earlier. These thresholds are summarized

below.

Everyone who has Form 8938 reporting requirement has

FBAR reporting. However, everyone who has FBAR

reporting may not have Form 8938 reporting.

L i n e - b y - L i n e f i l i n g i n s t r u c t i o n s

f o r F i n C E N F o r m 1 1 4

Access the right type of form here.

If you are an individual (or married person filing jointly)

– select Individual type. 

Fill out the basic information requested on the first page

of the form and click on START FBAR.

Filing name will be your last name followed by FBAR

and the calendar year for which you are filing the form

for. For instance, John Doe is filing FBAR for 2018

calendar year.

Then proceed to Filer information where you will enter

your personal information.  If you are US Citizen or tax

resident with an Social Security Number (SSN) or Tax

Identification number (TIN), enter that information here. 

If you do NOT have SSN or TIN, enter your foreign

identification document details (usually passport details).

Questions 5 thru 13 are basic.  Enter your ‘residential’

address, wherever you happen to live and receive

correspondence at.

Question 14a and b needs to be answered based on your

situation.

Proceed to Part II Separate/Joint filer section to complete

the information requested.  If you have more than one

account, simply press the + sign (highlighted in yellow in

the picture) to add more sections to enter your account

information.
As you can see, we couldn’t find Binance’s actual address

– so we listed the city/country in the respective fields. Note

that address is NOT mandatory field when completing

FinCEN Form 114. 

If you hold joint accounts, proceed to Part III to disclose

those accounts. You first start with your details and then

just add your spouse details for ALL accounts where you

hold the accounts jointly.  Indicate (SPOUSE) in brackets.

Use Part IV if you have access to foreign financial

accounts but do not have any financial interest in them. For

instance, if you have signature authority over your

company’s foreign financial account but you personally do

not have funds in these accounts – then such accounts need

to be reported in this section.

Information that needs to be disclosed is similar to what

we discussed earlier. It is important to include your

designation on line 43 that gave you signatory authority.

Part V is used specifically when you (or your US entity)

owns 50% or more ownership in another entity that is

required to file FinCEN Form 114. We will not deal with

this for the purposes of this overview.

After you have completed the required sections, you can

return to page 1, click on sign the form.  Follow the

prompts and do not forget to hit submit. Keep the

acknowledgement email from the BSA system. This is

your proof of compliance.

Do this each year you or your spouse meet the filing

thresholds of FBAR.
 Frequently Asked Questions

1. What exchange rates do I use to arrive at US Dollar

values?

For the purposes of FinCEN Form 114, you can use US

Treasury rates issued each year. Here is the link (please

check for correct calendar year)

For the purposes of Form 8938, you can use IRS rates, link

here.

2. I own accounts jointly with my spouse, can I disclose

them on same form?

Yes, you can disclose jointly held accounts on a FinCEN

Form 114 and Form 8938. If you are filing ‘married filing

separate’ returns for federal tax purposes – then you have to

file Form 8938 separately (as per thresholds). If you or your

spouse have separate foreign financial account(s) and you

individually meet aggregate value threshold – you and your

spouse have to file separate FinCEN Form 114 to disclose

each of your accounts.

3. Exchanges do not assign account number, what do I

write in place of Account number?

When it comes to FBAR and FATCA disclosures,

disclosure is more important than demographic

information. Most exchanges do not allot you an account

number, in that case, you can either write “Account number

not assigned” or use your email address in place of account

number. Please make an effort to see if your exchange as

assigned your account any unique ID, if so, you can use

that. Referral ID is generally not a reliable account identifier

and using email address is a better alternative in our

opinion.

4. None of my accounts had more than $10,000 during

2018 calendar year, do I still file FinCEN Form 114?

This warrants repetition. You are looking at ‘aggregate

value’ in a foreign financial account and not individual

account values when determining the filing thresholds for

FBAR and FATCA reporting. If your aggregate account

values are too close to the filing thresholds – report.

5. Do I include account values in CoinBase and Gemini

when determining the thresholds?

No. None of your US based exchange account values need

to be considered when determining the your ‘foreign’

financial account values.

6. What if I work for an exchange but do not own crypto

myself?

If you have signatory authority over foreign financial

accounts, including foreign exchange accounts, you will

have disclosure requirements. Same filing thresholds as

above apply to you. If you merely work for an exchange or

company that holds foreign financial accounts, including

crypto, you do NOT have a filing obligation as long as you

do not have signatory authority or any financial interest in

those accounts.

7. I maintain the account on behalf of a company, what

are my obligations?

If you have signatory authority over foreign financial

accounts, including foreign exchange accounts, you will

have disclosure requirements. Same filing thresholds as

above apply to you. If you merely work for an exchange or

company that holds foreign financial accounts, including

crypto, you do NOT have a filing obligation as long as you

do not have signatory authority or any financial interest in

those accounts.

8. Are disclosure requirements different if I hold

security tokens?

Yes. See below.

9. Are tokens held in my personal wallets, like

MyEtherWallet or Trezor, need to be disclosed on

FinCEN Form 114?

No. Cryptocurrencies held in a personal digital wallet like

Myetherwallet or Hardware wallet, etc. are not subjected to

FinCEN Form 114 reporting. This will be true even if you

are holding security tokens in your personal digital wallets

(or hardware wallets).

10. Are tokens held in my personal wallets, like

MyEtherWallet or Trezor need to be disclosed on Form

8938?

Maybe. As of today (November 2018), we do not have

clear guidance if all tokens are security tokens or which

ones are. If you hold the tokens in a personal digital wallet

(or hardware wallet) – you may not need to disclose them

on Form 8938, as of 2018 calendar year. However, if SEC

(and IRS) rule that the tokens you hold are securities – then

even if you hold them in your personal wallets – they will

need to be disclosed for the purposes of Form 8938

disclosures, if the thresholds are met.

11. Are all tokens considered securities for the purpose

of Form 8938 filing for 2018 calendar year?

At this time, SEC is of the opinion that almost all utility

tokens could be securities. We do not have affirmative

guidance from SEC or IRS that classifies all utility tokens

as securities. If and when such guidance comes out –

remember that – it doesn’t matter if you hold such security

tokens in digital wallets or on exchanges – you may have

disclosure under Form 8938 reporting rules.

12. What is the big deal if I fail to disclose the FinCEN

Form 114?

Failure to comply with disclosure requirements can result

in serious monetary penalties and/or criminal proceedings,

or both. Below is the direct screenshot from

the instructions:

U.S.C Section 5322 (a) and (b) both cover penalties ranging

from $250,000 to $500,000 or 5 to 10 years of prison time

or both.  That is the extent of seriousness involved in failing

to disclose the foreign financial accounts.

Even if you are not required to file FinCEN Form 114, you

may have Form 8938 reporting requirements under FATCA

regulations
References with QR codes

We are including QR code to make it easy to access the

references if you happen to read this on printed paper (and

we are assuming you have a smart phone)

FinCEN Form 114

FATCA Forms

US Treasury rates issued each year.

IRS rates
This material has been prepared for general

informational purposes only and it is not

intended to be relied upon as accounting, tax, or

other professional advice. Please consult with a

professional for specific advice.

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