FBAR and FATCA Reporting
US taxpayers need to file FBAR (Foreign Bank and Financial Accounts) and FATCA (Foreign Account Tax Compliance Act) reports, if their foreign assets/accounts exceed certain thresholds. There still might be some legal uncertainty on what crypto holdings would qualify as foreign assets, but considering the severe penalties for FATCA and FBAR reporting violations, we recommend reporting all cryptocurrency holdings as foreign assets.
Any United States person must file an annual informational Report on Foreign Bank and Financial Accounts (FBAR) or FinCen 114 if he/she has:
- a financial interest in or signature or other authority over at least one financial account located outside the United States, if
- the aggregate value of those foreign financial accounts exceeded USD 10,000 at any time during the calendar year reported
The details reported include:
- Name on the account,
- Account number,
- Name and address of the foreign bank,
- Type of account, and
- Maximum value during the year
This report is separate from the Income Tax reporting and must be filed online using the BSA E-filing System and has original due date of April 15th of the following tax year. The filing deadline is expended automatically to October 15th of the following tax year.
What are the penalties for FBAR violations?
If the violation is non-willful, the civil penalty is USD 10,000 per account, per violation. For willful violation, the penalty is equal to the greater of USD 10,000 or 50% of account balances. In such cases also criminal penalties may also apply.
United States taxpayer living abroad or in the United States, who holds specified foreign financial assets and files an income tax return, must also file Form 8939, Foreign Account Tax Compliance Act (FATCA). The reporting thresholds for Form 8938, Statement of Specific Foreign Financial Assets, depending on whether a taxpayer files a joint income tax return or lives abroad. You can find below the summary of the thresholds or visit the IRS website for more details:
Taxpayers living abroad
You are considered to live abroad if you are a U.S. citizen whose tax home is in a foreign country and you have been present in a foreign country or countries for at least 330 days out of a consecutive 12-month period.
- If you are not a married person filing a joint income tax return you must report if the total value of your specified foreign financial assets is more than USD 200,000 on the last day of the tax year or more than USD 300,000 at any time during the year.
- If you are married filing a joint income tax return you must report if the total value of specified foreign financial assets is more than USD 400,000 on the last day of the tax year or more than USD 600,000 at any time during the year.
Taxpayers living in the United States
- If you are unmarried you must report if the total value of your specified foreign financial assets is more than USD 50,000 on the last day of the tax year or more than USD 75,000 at any time during the tax year
- If you are married filing a joint income tax return you must report if the total value of your specified foreign financial assets is more than USD 100,000 on the last day of the tax year or more than USD 150,000 at any time during the tax year.
- If you are married filing separate income tax returns you must report if the total value of your specified foreign financial assets is more than USD 50,000 on the last day of the tax year or more than USD 75,000 at any time during the tax year. For purposes of calculating the value of your specified foreign financial assets in applying this threshold, include one-half the value of any specified foreign financial asset jointly owned with your spouse. However, report the entire value on Form 8938 if you are required to file Form 8938.
What are FATCA Penalties?
There are severe penalties for each FATCA reporting violation that may accumulate to a huge amount. The statute of limitations can also be considerably extended for the corresponding tax year and criminal penalties may apply. Failing to disclose may result in a USD 10,000 penalty per each violation, an additional penalty of up to USD 50,000 for continued failure to file after IRS notification, and a 40 percent penalty on an understatement of tax attributable to non-disclosed assets. The statute of limitations is also extended to six years after you file your return if you omit from gross income more than USD 5,000 that is attributable to a specified foreign financial asset. If you fail to file or properly report an asset on Form 8938, the statute of limitations for the tax year is extended to three years following the time you provide the required information.
How to file FBAR and FATCA?
Considering the complexity and the risks of violating FBAR and FATCA reporting we recommend using professional applications and / or advisors to file FBAR and FATCA reports. Cryptotax US application includes both FATCA and FBAR reporting based on the framework developed and approved by a Big 4 accounting firm.