Are Overseas Hybrid Crypto/Bank Accounts Reported on FBAR?
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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:
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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).
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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.
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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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