FBAR for Crypto (Regulations for 2023)

FBAR is another name for FinCEN Form 114, previously called the Report of Foreign Bank and Financial Accounts. The FBAR is designed to track foreign financial assets to prevent crimes like tax evasion. It requires any US trader who held $10,000 or more in one or more foreign bank accounts during the tax year to report the balances of said accounts.

Although it has tax implications, the report itself is not made to the IRS but rather to the US Treasury Department through the Bank Secrecy Act's e-filing system.

According to current Financial Crimes Enforcement Network (FinCEN) directives, US taxpayers at this time are only required to disclose cryptocurrency information on an FBAR in 2023 if crypto is maintained within an overseas account that also contains assets subject to reporting. 

For example, if a US taxpayer converts cryptocurrency into foreign currencies housed in an identical account (and the aggregate value of these foreign currencies surpassed $10,000 at any point in 2022), the taxpayer would be obligated to declare the complete account value, including cryptocurrency holdings.

What is the deadline for filing my FBAR?

Per the IRS and FinCEN, the annual FBAR reporting on 2022 activity is due April 15 of 2023. Taxpayers are permitted an automatic extension to October 15 2023 and do not need to request an extension to file the FBAR.

As noted, the FBAR is required for US taxpayers with joint currency and crypto accounts worth over $10,000 at any point in 2022. While this affects a relatively small number of cryptocurrency investors and businesses, the obligation to submit IRS Form 8938 has a broader scope. 

This obligation, established under the Foreign Account Tax Compliance Act (FATCA), encompasses a wider range of "foreign financial assets" beyond just offshore accounts. Although the IRS has not yet issued definitive guidance on how FATCA pertains to cryptocurrency assets held overseas, it seems probable that cryptocurrency aligns with the definition of a foreign financial asset as outlined in the statute. 

Consequently, investors and businesses whose cryptocurrency holdings exceeded the FATCA reporting thresholds in 2022 must disclose these holdings to the IRS using Form 8938 in 2023. The conservative approach here is to file. When in doubt, our crypto tax experts are available to assist.

For the year 2023, the FATCA reporting thresholds stand as follows:

• U.S. Residents: Total value surpassing $50,000 on December 31, 2022, or exceeding $75,000 at any point during 2022 (doubled for married couples filing jointly).

• Non-U.S. Residents: Total value surpassing $200,000 on December 31, 2022, or exceeding $300,000 at any point during 2022 (doubled for married couples filing jointly).

Here are four, simple steps showing how to file an FBAR. When in doubt, our crypto tax professionals at TokenTax can assist.

1. Use crypto tax software to organize your transactions

If you’ve traded on multiple exchanges, it may be helpful to use crypto tax software to aggregate and organize all your accounts so you can determine if and what you need to report. 

If you are using TokenTax and have access to our FBAR feature, you will receive a report that tells you what the highest balance you had in foreign accounts was during the last tax year.

If you are already a Basic or Premium user and need to purchase the FBAR add-on, you can do so at the checkout page. Be sure that you've uploaded all your crypto data, including deposits and withdrawals for all exchanges. You can then generate the FBAR form in your Documents page. 

2. Fill out your personal information on FinCEN's e-filing site

Individuals can use the Bank Secrecy Act (BSA) e-filing system to report their FBAR.FBARs should be filed by the April 15 tax deadline or by the October 15 tax extension deadline.

If an investor fails to file by April 15, they'll be granted an automatic extension, so there’s no need to file for any kind of FBAR extension. 

In Part I of the e-filing process, fill out your personal information.

3. Provide information about the foreign crypto exchanges you've used

In either Parts II or III, you will provide information about the foreign exchanges on which you hold cryptocurrency. If you are a single filer, then fill out Part II. If you are completing the FBAR for jointly held accounts where both individuals have signature authority, then use Part III.

If you need to report multiple exchanges you can create copies of the form by clicking the + box at the top of the form in Pt II or III. 

4. Enter the account balance details for each exchange

For each exchange, here's how we fill typically fill out the FBAR for TokenTax customers:

• On the top row of your TokenTax-generated FBAR report, you'll see the maximum account value. Enter this in the applicable field on the BSA e-filing site.

• For "Type of account," select "Other" and then in the box to the right, type in "Cryptocurrency exchange."

• For "Financial institution name," enter the name of the exchange.

• For "Account number or other designation, " enter the email address used for the exchange login.

• For the exchange's physical address, fill it out to the best of your ability. Some exchanges share their addresses, while others keep them secret for security reasons. At a minimum, the exchange's country should be entered. You can find a list of popular foreign exchanges' countries below.

The final parts, IV and V, are typically left blank. Finally, add your signature to the document and submit.

Consult FinCEN’s instructions or a crypto tax accountant for more support on filing the FBAR.

Per the IRS, for every account requiring an FBAR report, taxpayers are required to maintain records containing the following details:

• Account holder's name.

• Account number.

• Foreign bank's name and address.

• Account type and highest value reached within the year.

The legislation does not stipulate a specific document type to accompany this information. Documents such as bank statements or a duplicate of a submitted FBAR with the necessary details could suffice.

Typically, these records should be retained for a period of five years from the FBAR's due date.

The 8938 is similar to the FBAR. It is a form that is reported to the IRS on your tax returns, while the FBAR is filed with FinCEN. The 8938 also has different, higher reporting thresholds, as set in the Foreign Account Tax Compliance Act (FATCA).

The FATCA thresholds are as follows for US resident taxpayers:

• Single filers: foreign assets worth more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year

• Married filing jointly: foreign assets worth more than $100,000 on the last day of the tax year or more than 150,000 at any time during the tax year

• Married filing separately: foreign assets more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year

And for non-US resident taxpayers:

• Total value surpassing $200,000 on December 31, 2022, or exceeding $300,000 at any point during 2022 (doubled for married couples filing jointly).

Read the IRS’s summary of FATCA reporting here for more information. Note that if you file a Form 8938, you may still need to file an FBAR as well. For more detailed information on the differences between the two forms, the IRS provides a table comparing Form 8938 and the FBAR.

The IRS has not given specific guidance regarding whether the FATCA applies to crypto held with foreign financial entities like cryptocurrency exchanges, but there’s no drawback to filing just in case. Many taxpayers are choosing to adhere to the FATCA requirement for digital assets in case later guidance requires crypto holders to file the 8938.

FBAR obligations extend beyond American citizens and encompass "US persons," a category encompassing:

• US citizens

• US green card holders

• Immigrants to the US with legal status

• Partnerships and corporations established under US jurisdiction

• Trusts featuring at least one trustee classified as a US person

Per the IRS, any of these US persons must file an FBAR to report if:

1. They have a financial interest in or signature or other authority over at least one financial account located outside the United States and if: 

2. The aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

Per a February 2023 Supreme Court ruling, the IRS can impose penalties for non-willful violations of "FBAR" reporting, calculated per report rather than per account. This recent Supreme Court decision brings clarity to taxpayers preparing voluntary disclosures or in discussions with the IRS about prior violations. 

Those facing such penalties should ensure not exceeding $10,000 per filed FBAR report in settlement talks. The ruling might also trigger more legal disputes over the line between deliberate and non-deliberate filing failures.

In case of willful violations, potential fines encompass $100,000 or half of the peak value of the accounts—whichever of the two is higher. The IRS has the authority to levy these penalties for each year that goes without filing. Willful failure to file FBARs over three years could mean fines of $300k or more.

TokenTax simplifies the process of filing your FBAR as part of our comprehensive crypto tax solutions. Our crypto tax professionals are available to help you with all aspects of your crypto tax needs, ensuring accurate and complete filings regardless of how you use crypto or where you report taxes. Here are some of the ways we make crypto tax filing easy.

1. Easy Data Import
Sync your data seamlessly by connecting TokenTax to your wallets and accounts. This integration minimizes manual data entry, allowing you to consolidate and analyze all your crypto-related information in a single location. Our system supports various integrations, including those for DeFi, NFTs, margin and futures trading.

2. Tax Reports
Gain real-time insights into your tax liability with our comprehensive tax reports. These reports encompass multiple tax calculation methods, such as FIFO, LIFO, Minimization, and average cost. Additionally, you can access features like tax loss harvesting dashboards, mining and staking income reports, and Ethereum gas fee reports.

3. Crypto Tax Forms
Our software automatically generates all the necessary tax forms, including Form 8949, Schedule D, and FBAR. These forms are crucial for completing your tax filings accurately, whether you choose to file with TokenTax or use another provider like TurboTax.

4. Reconciliation
For investors with more intricate accounting needs, we offer advanced reconciliation services handled by knowledgeable crypto tax professionals. We're equipped to manage complex scenarios, such as missing cost basis data, high transaction volumes, and cross-chain transactions.

5. Enterprise Solutions
If you require enterprise-level crypto tax solutions, we have tailored options available to meet your specific needs.

Ready to get started? Explore our plans and pricing to determine the best solution for your individual requirements. With TokenTax, you can streamline your FBAR filing process and ensure accurate compliance with crypto tax regulations.

You'll need to know which exchanges qualify as foreign financial institutions if you file an FBAR. Here is a list of some of the exchanges outside of the United States.

Common foreign exchanges

• Bibox (Singapore)

• Binance (Malta)

• Bitfinex (Taiwan)

• Bitflyer (Japan)

• Bithumb (South Korea)

• BitMEX (Seychelles)

• Bitstamp (U.K.)

• BTC Markets (Australia)

• Bybit (Singapore)

• CEX.IO (U.K.)

• Coss (Singapore)

• Deribit (Netherlands)

• Gate.io (Cayman Islands)

• HitBTC (Hong Kong)

• Huobi (Singapore)

• KuCoin (Hong Kong)

• Mercatox (U.K.)

• OKEx (Malaysia)

• The Rock Trading (Italy)

• Tidex (Russia)

• Uphold (U.K.)

• Yobit (Russia)

Here is a list of the most common US based exchanges. These do not need to be included on the FBAR. 

• Binance US

• Bittrex

• Cash App

• Circle

• Coinbase

• Coinbase Pro

• Gemini

• itBit

• Kraken

• Poloniex

DeFi exchanges

Because DeFi exchanges are not registered in any country, it is unlikely that a US trader would need to include them in FBAR or Form 8938 filing.

Here are answers to frequently asked questions about FBAR for crypto, how to file FBAR, and the 8938 vs FBAR.

Do I need to report joint ownership on an FBAR for crypto?

Yes, if accounts are jointly owned, you need to report all owners. On the FBAR, there is a separate space for this information, so you do not need to provide additional reports.

How do I report cryptocurrency to the IRS?

US taxpayers must declare all gains and losses from cryptocurrency transactions on Form 8949 and Form Schedule D. Additionally, incorporate any standard taxable income from crypto activities onto either Schedule 1 of Form 1040 or Schedule C if your income originates from self-employment. Attach each relevant form to your Individual Income Tax Return Form 1040.

What happens if I don't report cryptocurrency on taxes?

Failure to report crypto on your taxes can have significant repercussions. The exact outcomes differ based on your jurisdiction, but in general, it's crucial for taxpayers to accurately report cryptocurrency to avoid penalties, interest accrual, and potentially even criminal allegations.