Are Overseas Hybrid Crypto/Bank Accounts Reported on FBAR?
Currently, the rules involving the reporting of foreign cryptocurrency on the annual FBAR (Foreign Bank and Financial Account Reporting aka FinCEN Form 114) is in a state of flux. In other words, there is no set law as to whether or not these types of accounts are reportable — noting that there are potential cryptocurrency regulations promoting full transparency, along with increased crypto enforcement by the Internal Revenue Service. While an argument may be made that a cryptocurrency account is not reportable for FBAR, it would be more difficult to argue that a hybrid account that contains both Fiat and cryptocurrency would escape FBAR reporting. That is because the updated version of the FBAR publication guide for 2022 makes a distinction between purely crypto accounts and hybrid accounts.
Hybrid Crypto & Fiat Accounts
It was always our firm’s position that taxpayers with a hybrid account must be cautious and should consider reporting in order to earn on the side of caution.
Here is what the IRS provides:
Example: A foreign account holding virtual currency is not reportable on the FBAR (unless it’s a reportable account under 31 C.F.R. 1010.350 because it holds reportable assets besides virtual currency).
These funds aren’t reportable at this time, per FBAR regulations issued by FinCEN February 24, 2011, but FinCEN Notice 2020-2 indicates FinCEN’s intention to propose amending the regulations to include virtual currency as a type of reportable account under 31 CFR 1010.350.
Missed Reporting Hybrid Crypto/Fiat and Other Accounts
When a person missed the reporting in one or more prior years, the Internal Revenue Service offers various amnesty programs to assist with getting into compliance. You should consider consulting with a Board-Certified Tax Law Specialist if you are interested in getting into compliance.
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