Do Cryptocurrency Investors Need to File an FBAR in 2023?

In 2020, the Financial Crimes Enforcement Network (FinCEN) signaled that it would amend the regulations under the Bank Secrecy Act (BSA) to require the inclusion of stand-alone cryptocurrency accounts on taxpayers’ FBARs. But, as of now, this still hasn’t happened.

As a result, taxpayers’ FBAR filing requirements remain unchanged for 2023 with regard to Bitcoin and other digital currencies. This means that taxpayers whose only foreign assets are in cryptocurrency do not need to file. For those who have offshore accounts that hold cryptocurrency and other assets (i.e., foreign currencies), these accounts are only reportable if the non-crypto assets held in these accounts trigger an FBAR filing obligation.

Taxpayers Who Don’t Need to File an FBAR May Still Need to File IRS Form 8938

While relatively few cryptocurrency investors (and businesses that accept Bitcoin and other cryptocurrencies as payment) will need to file an FBAR related to their cryptocurrency holdings in 2023, the obligation to file IRS Form 8938 applies more broadly. This obligation, which exists under the Foreign Account Tax Compliance Act (FATCA), applies to all “foreign financial assets”—not just offshore accounts.

While the IRS is yet to provide clear guidance on the applicability of FATCA to cryptocurrency assets held overseas, it appears likely that cryptocurrency meets the definition of a foreign financial asset under the statute. As a result, investors and businesses whose cryptocurrency holdings exceeded the FATCA reporting thresholds in 2022 will need to make an informed decision about whether to disclose these holdings to the IRS on Form 8938 in 2023.

For 2023, the FATCA reporting thresholds are:

• U.S. Residents – A total value of more than $50,000 on December 31, 2022 or a total value of more than $75,000 at any time during 2022 (doubled for married taxpayers filing jointly).
• Non-U.S. Residents – A total value of more than $200,000 on December 31, 2022 or a total value of more than $300,000 at any time during 2022 (doubled for married taxpayers filing jointly).

These thresholds apply to the aggregate of a taxpayer’s foreign financial assets. So, even if a taxpayer’s offshore cryptocurrency holdings never exceeded an applicable threshold in 2022, the taxpayer will still need to file IRS Form 8938 if the taxpayer has other assets that trigger the filing requirement. If a taxpayer’s offshore cryptocurrency holdings remained under the thresholds and the taxpayer has other foreign financial assets that exceed an applicable threshold independently, the taxpayer must report all foreign financial assets on IRS Form 8938—potentially including Bitcoin and other cryptocurrencies.

Since failure to disclose foreign accounts on an FBAR or foreign financial assets on IRS Form 8938 can lead to steep penalties (including criminal penalties in some cases), taxpayers must make informed decisions about their filings in 2023. If you have questions or concerns—or if you need to correct a past filing deficiency—you should consult with a tax attorney promptly.

Request a Confidential Consultation at Thorn Law Group in Washington D.C.

If you have questions or concerns about your cryptocurrency-related tax obligations, we can help you make informed decisions. To request a confidential consultation with tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 202-349-4033, email ket@thornlawgroup.com or contact us confidentially online today.