U.S. citizens and residents are required to disclose foreign bank and other international financial accounts to the U.S. Treasury if the combined balance of all accounts exceeds $10,000. The penalties for failure to file start at $10,000 and can exceed the account balance if the non-filing is willful. So what is a foreign bank account?
Accounts not maintained in the United States are foreign. So if you opened a bitcoin account administered outside of the U.S., the account is foreign. But is it a bank account?
The IRS has not published guidance for bitcoin accounts. But a federal district court recently authorized the IRS to serve a John Doe summons on Coinbase to get account holder’s names. And the IRS successfully argued in court that particular online gambling accounts are foreign bank accounts and reportable to the U.S. Treasury. In this case, the taxpayer had to pay $40,000 in penalties.
It is not clear if bitcoin accounts (or similar cryptocurrency accounts) are reportable to the U.S. Treasury. But the penalties are high, so it is best to take a cautious approach and report the account(s) to avoid paying penalties.
Our company has experience preparing foreign bank account disclosure forms and available to assist you. Please call our office at 323-285-9880 for additional information. The reports are due by April 15th.