Do I Need to Report my Bitcoins on my FBAR Forms?

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Question

I actually live in Canada but I’m also an American that files US tax returns and FBARs each year. I have some bitcoins and Ether coins that I’ve accumulated over the years. The coins are spread between online crytco accounts like bitrex and some are on my hardware wallet at home.

Do I need to include my crytocoins on my FBAR filings?

Answer

Very good question, I don’t think I’ve had this one before. Technically speaking you need to report “foreign financial accounts” on your FBAR forms. Foreign financial accounts are defined as:

“Foreign Financial Account.  A foreign financial account is a financial account located outside of the United States. For example, an account maintained with a branch of a United States bank that is physically located outside of the United States is a foreign financial account. An account maintained with a branch of a foreign bank that is physically located in the United States is not a foreign financial account. A “foreign country” includes all geographical areas outside the United States, the commonwealth of Puerto Rico, the commonwealth of the Northern Mariana Islands, and the territories and possessions of the United States (including Guam, American Samoa, and the United States Virgin Islands).”

I think you can easily make the argument that the coins held in US cryto accounts are considered US based and not reportable on your FBAR accounts. You’ll want to ensure however that these accounts are physically served in the US as it’s very possible these brokerage operate outside of the US.

I hold the view that the risks associated with this position are not worth the small efforts required to list these accounts on form 114.

In that case you’ll want to ensure the accounts are definitely included on your FBAR forms. Also note that any accounts not listed on your FBAR forms because they are US based should be included on form T1135, Canadian foreign income verification forms.

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Some may try to make the argument that cryto coins like bitcoin and ether are not considered foreign financial accounts and should not be include on FBAR forms. I hold the view that the risks associated with this position are not worth the small efforts required to list these accounts on form 114.

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