Do you have to file an FBAR for a bitcoin account?

http://www.irsmedic.com/2013/03/28/bitcoin-and-fbar/

by babuskov • 13 years ago

50 46 13 years ago

irsmedic.com

unimpressive• 13 years ago

Excellent article, but it needs a title change.[0]

[0]: At the time of writing the title is "US citizens to report BitCoin accounts over $10.000 to the IRS"

tomku• 13 years ago

The headline is entirely speculation. The article itself is heavy on the ideology and light on facts.

Edit: The edited headline is STILL inaccurate. It's not a "law proposal". It's one tax lawyer's speculation.

babuskov2• 13 years ago

While I agree with you, I'm having a hard time explaining the article in a single short sentence. I actually found this link inside a long thread on a closed LinkedIn group discussing potential law, so it's not just one lawyer talking about it.

seanmcdirmid2• 13 years ago

And how is this not any different from our reporting requirements now? Any bank account we (US citizens) have over $10k must be reported.

jstanley• 13 years ago

Because it's just something you have, which might be worth $10k if you sold it.

If you own a car worth over $10k, do you need to report that?

iaw3• 13 years ago

Until explicitly stated otherwise bitcoins are considered, by definition, a cash-equivalent for US citizens. I take it you don't file taxes in the US (or at least don't have very many assets)?

mbetter2• 13 years ago

If it's held in a foreign account, for sure.

gamblor9564• 13 years ago

A car is not a liquid asset. Bitcoins do purport to be liquid assets.

loumf• 13 years ago

If someone pays you in cars, yes.

ojbyrne2• 13 years ago

I don't think that's quite true. Any _foreign_ bank account over $10k must be reported. However US bank accounts may be reported by the banks directly.

seanmcdirmid2• 13 years ago

Yes, but the effect is the same: just if we have foreign bank accounts, we must report them ourselves. They are all reported.

chiph• 13 years ago

It's actually a validation of Bitcoin as another currency. What this (proposed/speculative) law says is that Bitcoin is equally valid as the Euro or Yen, and thus a "foreign currency holding" which must be reported.

iaw3• 13 years ago

Validity of bitcoin as a currency is irrelevant. What is relevant is that a US citizen can possess a cash-equivalent that behaves in a fashion similar to foreign currencies or commodities. The tax law is pretty clear on investments and cash-equivalents, bitcoin is both without addressing a question of currency status.

Jackim• 13 years ago

I think a comma might be more appropriate here. North Americans usually use the $1,000 over the $1.000 format.

babuskov2• 13 years ago

Thanks, fixed it.

tlrobinson• 13 years ago

This begs the question, what is an "account" in Bitcoin? Can I not just make multiple Bitcoin addresses with $10,000 each?

iaw3• 13 years ago

The exchanges will all eventually have reporting requirements for US citizens making transfers above a certain threshold in a certain period of time.

Once the IRS actually gets to work and addresses this they'll probably end up altering terminology so that a bit coin "account" is comparable to all bit coins within an individuals direct ownership and control.

In the end investment proceeds from bitcoin will be taxed and traced. I wouldn't try to outsmart or game the US government in terms of account balances, I could see a "smart" early adopter going to jail because of their efforts to avoid taxes.

SilasX2• 13 years ago

And if the money's never on an exchange, but just in the network? And how do they prove I own any bitcoin?

ksherlock• 13 years ago

If you make money buying and selling bitcoins, that is a taxable capital gain.

nostromo• 13 years ago

Note the FBAR language:

United States persons are required to file an FBAR if .. . The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Em...

However, if I have my bitcoins here in the US, does that count as a foreign financial account? Or is it more akin to having a local store of gold. I doubt the IRS has any real guidance for these questions yet...

mahyarm• 13 years ago

Since ownership of bitcoins is having the private key that controls the address on a globally distributed general ledger, what the hell does location mean in this case?

mbetter2• 13 years ago

No, it really doesn't.

ancarda• 13 years ago

I fail to see how any regulation regarding BitCoin would work in practice. I think it would be hard to prove you have a BitCoin wallet as it's a quite anonymous system. Besides, I could have my wallet.dat file on a remote server and manage transactions through that.

I get the feeling the IRS right now think BitCoin is a joke and if/when it becomes a big deal, they'll panic and try to pass shifty laws. None of which will make any real sense.

If anything, they'll try to pass laws regarding moving money to/from USD <-> BTC.

redthrowaway• 13 years ago

Interesting idea for a startup if they go through with this: a service that provides plausible deniability for bitcoin wallets.

JumpCrisscross• 13 years ago

It is unlikely the IRS would need a new law to require Americans to report significant Bitcoin positions on their returns.

If you have a stack of cash in a drawer, you are supposed to tell the IRS about it. It does not matter if it's in dollars, yen, Swiss francs, or pounds sterling. The fact that a lot of people don't doesn't make it legal, just unlikely to be enforced unless you give the IRS a reason to hate you. If, on the other hand, you have a garage with millions of dollars of un-reported cash in it you become an IRS priority. This is no different, under present law, from someone holding millions of dollars in bitcoins across several wallets.

The IRS could also treat bitcoins as an asset, which would classify bitcoin transactions as barter and make holdings subject to capital gains (and losses) in dollar terms. All said, it would not need new legislation to deal with this.

andrewpi• 13 years ago

> If you have a stack of cash in a drawer, you are supposed to tell the IRS about it.

Under what regulation?

cantankerous• 13 years ago

If it's a heretofore unreported accession to wealth, that regulation would be the US Tax Code.

n3rdy• 13 years ago

> Under what regulation?

Unfortunately when it comes to the IRS, current laws and regulations are irrelevant. They prosecute retroactively and change the rules as they see fit to scare the public into compliance.

The fact that people are so quick to ask about IRS compliance with bitcoins is evidence of this. People feel an obligation to an entity they owe nothing to, because they are scared to death if they don't report a couple bitcoins, that FBI, secret service, or even ATF is going to break down their door and storm in with assault rifles.

gamblor9564• 13 years ago

You don't...unless it is in an offshore drawer.

See http://www.fincen.gov/news_room/nr/html/20110224.html, http://www.gpo.gov/fdsys/pkg/FR-2011-02-24/pdf/2011-4048.pdf.

temphn• 13 years ago

Suppose you have the Bitcoin on a local wallet, and your computer crashed, losing all the private keys (perhaps presenting the requisite Apple Store receipts when you took it down to the store to get repaired). A bit like losing your cash in a fire; computers do crash quite a bit. Not a lawyer, but I think something like that might be difficult to disprove in court. On the other hand, subsequent spending from those addresses would then be monitored. So perhaps best to report that computer lost/stolen.

nwh• 13 years ago

How would anybody know a particular address belongs to you?

Unless there's a direct connection with transactions, or you generate a vanity address with your name in it, there's probably not much way that you could.

rishimoko3• 13 years ago

As Bitcoin has no country or jurisdiction of origin, I fail to see how Bitcoin can be classified as foreign.

I also fail to see how the IRS has any regulatory power over a currency not defined by US tax law.

tptacek• 13 years ago

One easy way to disabuse yourself of this notion is to take a job working remote for a Canadian company.

rishimoko3• 13 years ago

The difference being they can't see you getting paid in bitcoins. They can see you getting paid through banks.

They have no regulatory power regarding Bitcoin because they have no way to enforce it.

gamblor9564• 13 years ago

The IRS is not regulating the foreign currency. It is regulating your conduct as an American taxpayer, pursuant to a Congressional grant of such authority.

rishimoko3• 13 years ago

> It is regulating your conduct as an American taxpayer

It can't regulate conduct it can't see.

Do you have to file an FBAR for a bitcoin account?

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