Us FATCA Compliance Guide for Cryptocurrency Owners and Form 8938 Filing Requirements

Table of Contents

Quick Facts
U.S. FATCA Compliance Guide for Crypto Assets
Form 8938 Crypto Assets FAQ

Quick Facts

Form 8938: Statement of Specified Foreign Financial Assets: Introduced in 2010 as part of the Foreign Account Tax Compliance Act (FATCA), this form requires U.S. citizens and resident aliens to report specified foreign financial assets (SFFAs) held in foreign financial accounts.
$50,000 threshold: Reportable assets must have a value of at least $50,000 if held in the tax year, or a combined value of at least $150,000 at any time during the year.
Crypto assets included: The IRS has clarified that cryptocurrency, including Bitcoin, Ethereum, and other digital coins, is considered a financial asset and is reportable on Form 8938.
Reporting requirements apply to: U.S. citizens, resident aliens, and certain U.S. entities (including partnerships, corporations, and trusts) with specified foreign financial assets exceeding the $50,000/$150,000 threshold.
2019 and later years: Reportable assets must be reported on Form 8938 using the “digital signature” process.
Gathering required documents: Reporters will need to gather and maintain records, including account statements, confirmations, and other documentation, to support their reported information.
Fines and penalties for non-compliance: Failure to file Form 8938 can result in fines and penalties, including accuracy-related penalties, information return penalties, and even criminal prosecution in some cases.
e-File Form 8938: Reporters can securely e-file Form 8938 and pay any associated penalties or interest using the IRS e-file system.
Internal Revenue Service (IRS) resources: The IRS offers various resources, including online guidance, FAQs, and instructional videos, to help taxpayers navigate Form 8938 and FATCA compliance.
US persons abroad: U.S. persons living abroad can file Form 8938 electronically using the IRS’s Foreign Account Tax Compliance Act (FATCA) e-file application.
Annual threshold increase: The $50,000/FATCA threshold may increase in future years, so it’s essential to stay informed and monitor tax law changes affecting Form 8938 and related reporting requirements.

U.S. FATCA Compliance Guide for Crypto Assets

The world of cryptocurrency is complex, with regulations and laws constantly evolving. For U.S. taxpayers, one crucial aspect of this regulatory landscape is the Foreign Account Tax Compliance Act (FATCA). This law requires certain U.S. taxpayers to report their foreign financial assets, including crypto assets, on Form 8938. In this guide, we’ll delve into the specifics of FATCA compliance for crypto assets, exploring what it means for U.S. taxpayers and how to navigate the reporting requirements.

Introduction to FATCA

FATCA is designed to combat tax evasion by U.S. taxpayers using foreign accounts. It requires foreign financial institutions (FFIs) to identify and report certain information about U.S. account holders. For individuals, this means reporting foreign financial assets on their tax return if the total value exceeds certain thresholds. Cryptocurrency, being a foreign financial asset, falls under these reporting requirements.

What is Form 8938?

Reporting Requirements

To comply with FATCA, U.S. taxpayers must report their foreign financial assets, including crypto assets, if the aggregate value exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year for single filers. For joint filers, these thresholds are $100,000 and $150,000, respectively.

Determining the Value of Crypto Assets

Determining the value of crypto assets can be complex. It’s generally advised to use the fair market value in U.S. dollars. For example, if you own Bitcoin and the exchange rate is 1 BTC = $40,000, the value of 1 BTC would be $40,000.

Important Dates and Deadlines

Tax Filing Deadline: Typically April 15th, but can be extended.
FBAR Filing Deadline: October 15th, for the Report of Foreign Bank and Financial Accounts.

Compliance Steps for Crypto Assets

To ensure compliance, follow these steps:

Identify Crypto Assets: List all your crypto assets.
Determine Value: Use the fair market value in U.S. dollars.
Check Thresholds: See if your total foreign financial assets exceed the thresholds.
File Form 8938: If necessary, file Form 8938 with your tax return.
Consider FBAR: If you have foreign financial accounts, you may also need to file the FBAR.

Crypto Assets and FBAR

While Form 8938 and the FBAR (FinCEN Form 114) both report foreign financial assets, they serve different purposes. The FBAR is used to report foreign financial accounts, and crypto assets can be considered financial accounts if they are held in an account with a foreign financial institution. However, the IRS has clarified that crypto assets themselves are not considered financial accounts for FBAR purposes.

Practical Considerations

<td/Form 8938 if foreign

Asset Type	Reporting Requirement
Foreign Bank Accounts	FBAR and Form 8938
Cryptocurrency Exchanges
Cryptocurrency held in Wallets	Generally not required for FBAR, report on Form 8938 if foreign

Consequences of Non-Compliance

Non-compliance can result in significant penalties. For Form 8938, the penalty for failing to file is $10,000, with an additional $10,000 for each 30 days of non-filing after receiving a notice, up to a maximum of $50,000. For the FBAR, the penalty can range from $1,000 to $100,000 or more, depending on whether the failure to file is deemed willful.

Guidance for Specific Scenarios

What about Crypto Assets?

Crypto assets are considered property for tax purposes. This means gains or losses from the sale or trade of crypto assets are subject to capital gains tax. For reporting purposes on Form 8938, if you have foreign crypto assets that meet the thresholds, you must report them.

Common Questions

Do I need to report every transaction? No, you report the value of your foreign financial assets, not each transaction.
Is my U.S.-based crypto exchange account reportable? Generally, no, as it is not considered a foreign financial account.
Can I use tax software to file Form 8938? Yes, many tax software programs support Form 8938.

Future Compliance

Given the evolving nature of cryptocurrency and tax laws, it’s essential to stay informed. The IRS may update guidelines or change reporting requirements. For the latest information, always refer to the official IRS website.

Form 8938 Crypto Assets FAQ

What is Form 8938 and why do I need to file it?

Form 8938 is a FinCEN Form used to report specified foreign financial assets, including cryptocurrencies, held by U.S. persons. You need to file Form 8938 if you have assets, including cryptocurrencies, that meet the reporting threshold ($50,000 or more in the aggregate value of the specified foreign financial assets) and you are required to file a U.S. tax return.

What are specified foreign financial assets, and do cryptocurrencies fall under this category?

Specified foreign financial assets include: (1) interests in foreign-owned financial institutions; (2) foreign accounts; (3) foreign stock; (4) foreign securities; (5) foreign partnerships; and (6) foreign-issued obligations and financial instruments. Cryptocurrencies, such as Bitcoin, Ethereum, or other digital currencies, can be considered specified foreign financial assets if they meet the reporting thresholds.

What is the reporting threshold for Form 8938?

The reporting threshold for Form 8938 is $50,000 or more in the aggregate value of the specified foreign financial assets on the last day of the tax year.

Do I need to report my cryptocurrency holdings on Schedule B of my Form 1040?

Yes, you may need to report your cryptocurrency holdings on Schedule B of your Form 1040 if the aggregate value of your cryptocurrency holdings meets the reporting threshold ($10,000 or more at any time during the tax year).

How do I determine the value of my cryptocurrency holdings for Form 8938 purposes?

The value of your cryptocurrency holdings for Form 8938 purposes is the highest value of your asset on the last day of the tax year. You can use the FMV (Fair Market Value) of your cryptocurrency on the last day of the tax year, as reflected on a legitimate financial record or statement, such as a brokerage statement or a bank statement.

Who is required to file Form 8938?

U.S. persons, including individuals, estates, trusts, and certain entities, are required to file Form 8938 if they have specified foreign financial assets, including cryptocurrencies, that meet the reporting threshold.

Are there any exceptions to filing Form 8938?

Yes, there are several exceptions to filing Form 8938, including: (1) non-U.S. persons; (2) U.S. persons who are neither married nor a single individual, or who are married but reside in a U.S. territory; (3) estates and trusts exempt from filing a U.S. tax return; and (4) certain entities that do not have non-U.S. ownership.

What are the consequences of not filing Form 8938?

Failure to file Form 8938 can result in severe penalties, including fines, interest, and even criminal prosecution. Additionally, the IRS can impose penalties for failure to file, failure to include all required information, or failure to file by the deadline.

How do I file Form 8938?

You can file Form 8938 online or by mail. You must attach Form 8938 to your U.S. tax return (Form 1040) and keep a copy of the form and supporting documentation.

Where can I get more information about Form 8938 and the requirements for reporting cryptocurrency holdings?

You can find more information about Form 8938 and the requirements for reporting cryptocurrency holdings on the IRS website (irs.gov) or consult with a tax professional or accountant.