What are the 2023 FBAR Cryptocurrency Reporting Rules?

Now that we’re well into 2023, Tax Day is right around the corner. For cryptocurrency investors and businesses that accept Bitcoin and other cryptocurrencies as a form of payment, this means that it is time to figure out how much gain and loss they realized on their transactions throughout 2022. But does it also mean they need to prepare to file an FBAR with their annual returns?

The FBAR Cryptocurrency Reporting Rules Remain Unchanged for 2023

The FBAR filing requirements as they relate to cryptocurrency are remaining unchanged for 2023. While the Financial Crimes Enforcement Network (FinCEN) signaled its intent to make all cryptocurrency accounts reportable in 2020, it has not yet moved forward with its proposal. As a result, the guidance contained within FinCEN’s Notice 2020-2 still stands:

“[A]t this time, a foreign account holding virtual currency is not reportable on the FBAR (unless it is a reportable account under 31 C.F.R. 1010.350 because it holds reportable assets besides virtual currency).”

Based on FinCEN’s guidance, the only reason a U.S. taxpayer may have to include cryptocurrency on an FBAR in 2023 is if the cryptocurrency is held in an offshore account that also holds reportable assets. For example, if a taxpayer exchanges cryptocurrency for foreign currencies held within the same account (and the total value of these foreign currencies exceeded $10,000 at any time in 2022), then the taxpayer would have to report the entire account value—cryptocurrency included.

The FATCA Cryptocurrency Reporting Rules Also Remain Unchanged

The FATCA cryptocurrency reporting rules are also remaining unchanged for 2023, and there is a greater chance that taxpayers will need to report their cryptocurrency holdings under FATCA. Under FATCA, U.S. taxpayers must use IRS Form 8938 to report all “foreign financial assets;” and while the IRS is yet to provide clear guidance, there is a high likelihood that cryptocurrency held in offshore accounts qualifies as a reportable asset under the statute.

Like the FBAR filing requirement, the FATCA filing requirement is subject to minimum value thresholds. These thresholds apply to the aggregate value of a taxpayer’s foreign financial assets—including, but not limited to, Bitcoin and other cryptocurrencies held in offshore accounts. So, even if a taxpayer’s foreign cryptocurrency holdings do not exceed the applicable threshold, the taxpayer may still need to file IRS Form 8938 if it has other assets that are reportable under FATCA.

Like U.S. taxpayers’ annual income tax returns, FBARs and IRS Form 8938 are due on Tax Day, which is April 18, 2023 (though FBARs and IRS Form 8938 are subject to an automatic six-month extension). If you have questions about your filing obligations—or if you are concerned that you may be behind on your federal cryptocurrency reporting obligations—you should consult with an experienced tax lawyer promptly.

Consult with Tax Lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group

Do you have questions or concerns about your federal cryptocurrency reporting obligations in Boston? If so, we encourage you to schedule a consultation at Thorn Law Group. To request an appointment with tax lawyer and Managing Partner Kevin E. Thorn, please call 617-692-2989, email ket@thornlawgroup.com or contact us confidentially online today.