Over the past decade, cryptocurrency has evolved and developed into a global phenomenon. Perhaps nothing highlights the way our world has “shrunk” and international borders have blurred quite like the rise of these digital currencies.
Unfortunately, the US government agencies (IRS and FinCEN) responsible for setting rules around the reporting of foreign income and assets are yet to release concrete guidelines around the disclosure of these assets for US tax purposes.
Here is what we do know for sure: if you are a US person, and you derive income from the sales or exchanges of cryptocurrency, you are still obligated to report this income on your US tax return, even if the sale happened abroad. Vague guidance will not be a compelling argument against knowing that this type of income was subject to US taxation.
As for foreign asset reporting requirements, while the current guidelines are vague, we believe that based on legislation and actions by the IRS in recent years, there is a general movement towards requiring more financial transparency on all financial assets held outside of US financial institutions – not less. As a general rule, just assume you cannot skirt FBAR or other foreign asset reporting requirements simply by holding your foreign funds as crypto, rather than fiat currency.
If you have concerns about the tax reporting requirements for your cryptocurrency, our attorneys can assist you in analyzing your situation and current crypto holdings and applying the existing guidance to your situation. Contact our firm today to discuss your cryptocurrency reporting concerns.