No FBAR wallet reporting example in the entire world


#41

The official did not “expect” we would report it,
just like we didn’t “expect” we would go to jail.
Let’s not take chances.


#42

OK here’s another situation (CRYPTOCURRENCY EXCHANGE ACCOUNTS):

Say on some foreign cryptocurrency exchange you deposited X $USD. The
next day with it you purchased Y BTC and Z BCH, and left them there on
that exchange through the end of the year.

The first thing one notices is this all is only one account. Not two nor
three.

And indeed on some cryptocurrency exchanges each user doesn’t even have
a numerical user ID that could be considered an “account number” for
FBAR. All that there might be to distinguish your account from other
exchange users might only be your email address. (I hope FBAR won’t
choke on “@” and “.” embedded in account numbers.)

For FBAR’s “Maximum account value” we could report X $USD, or maybe
instead the year end BTC rate * Y + BCH rate * Z …

But when you come to think of it, who ever heard of a bank that didn’t
have separate accounts for separate currencies? How could anybody put
e.g., Mexican pesos and Euros into the same account?

Therefore it seems we must on FBAR split our account into three:
Account number or other designation : FARF@EXAMPLE.NET/CASH PORTION
Account number or other designation : FARF@EXAMPLE.NET/BITCOIN PORTION
Account number or other designation : FARF@EXAMPLE.NET/BITCOIN CASH PORTION

Ah, even though we now two more “accounts” to report, but now the mess
is much more manageable, for both us and hopefully the FBAR staff. For
each of the three we just take the highest it ever reached the entire
year (e.g. 8 BTC). And then write that number in USD using the end of
the year conversion rate.

If in fact we didn’t use X $USD, but instead say Mexican pesos, our
Account number or other designation : FARF@EXAMPLE.NET/CASH PORTION
would stay the same, just remembering to write the
Maximum account value:
in USD at end of the year rates as always.

(Hope FBAR won’t choke on “/” and " ".)

I’ll Cc: FBARquestions@irs.gov, FRC@fincen.gov .
They’ll be sure to let me know if my above guesses are indeed what they
would like me to do.


#43

Stop the presses everybody, @thom was right.

From: White Ellen Ellen.White@irs.gov
Subject: RE: Cryptocurrency Exchange Accounts
To: Dan Jacobson jidanni@jidanni.org
Date: Mon, 29 Jan 2018 10:35:18 +0000

Bitcoins and other virtual currencies in foreign accounts are not reported on FBARs at this time but that FinCEN may require such reporting at a later date.

The content of this e-mail is based on the information received and limited by the facts provided and questions presented. If there are any errors or omissions in the facts, the accuracy and the reliability of the response may be affected. This e-mail is only intended for the person(s) to whom it is addressed and may contain confidential information. If you have received this e-mail in error, please immediately delete this message from your system and do not disclose its content."

Ellen White

Tax Law Speclialist

SB/SE Speciality BSA Deparment

(313) 234-15954-VMM

(313) 234-2278 - FAX

-----Original Message-----

From: Dan Jacobson [mailto:jidanni@jidanni.org]

Sent: Monday, January 29, 2018 4:08 AM

To: *SBSE FBAR Form FBARQUESTIONS@irs.gov; FRC@fincen.gov

Subject: Cryptocurrency Exchange Accounts

Dear FBAR Team: here’s a question I posted to

No FBAR wallet reporting example in the entire world


US IRS tax reporting for cryptocurrencies
#44

OK I told Ellen:

One assumption that I will still make is about real currency deposited
onto a foreign cryptocurrency exchange, in preparation to convert it
into cryptocurrency. After days or minutes the user sees his cash has
now been confirmed as having arrived at the cryptocurrency exchange, and
he is free to start buying cryptocurrency with it. I will still report
the maximum real currency in this case. And of course when he sells his
cryptocurrency, creating a real currency cash balance at the
cryptocurrency exchange, even if for only a short time. I will report
this too.


#45

And of course, of all the items I report, if their total reaches $10000, then I have to send the report.


#46

Huh?? Didn’t you get 13860.1363?

{“bpi”:{“2017-12-31”:13860.1363},“disclaimer”:“This data was produced from the CoinDesk Bitcoin Price Index. BPI value data returned as USD.”,“time”:{“updated”:“Jan 1, 2018 00:03:00 UTC”,“updatedISO”:“2018-01-01T00:03:00+00:00”}}

Even if you get some “crazy” number from Coindesk you have to use your innate skepticism to vet whether the amount you got was reasonable.

Per http://www.businessinsider.com/bitcoin-price-value-increasing-on-final-day-of-2017-2017-12
A bitcoin was worth $14,129 at 6 p.m. (GMT) on New Year’s Eve. You


#47

STOP THE PRESSES! STOP THE PRESSES! FinCEN speaks!

Nice going man!!! Now I have to update my tax talk.

So what happens with the IRS?? (Yes, I see that she has an IRS e-mail) Guessing that this flows downhill to the IRS.


#48

Never take even my quoted word for it. Call Ellen up on her VMM number to confirm.


#49

Wow a government entity making a logical and reasonable decision.


#50

Jidanni,
How about forwarding that e-mail to me? plrehm@yahoo.com (this is a live account but not the one I always use)


#51

Not that it matters anymore, but what is one’s favorite (API best) site to get the final 2017 rates of the day? The BPI site it turns out only has the BTC rate. Not LTC, BCH, etc,


#52

OK I sent it to you but it is the same as above.


#53

got it. thanks asdfasdf


#54

Thanks for sharing @jidanni! Good to get a confirmation for this. Let us know what Ellen replies to your followup questions.


#55

Hard currency sent to cryptocurrency exchanges

OK here’s what I am going to do (and send
FBARQUESTIONS@irs.gov, FRC@fincen.gov, Ellen.White@irs.gov for any
second opinions,) and I think it will better match what
the IRS has in their records from foreign countries.

I will only use the hard currency I sent to and from the foreign
cryptocurrency exchanges when making each FBAR "Maximum account value"
calculation for my accounts on cryptocurrency exchanges.

For instance Case I: say I sent $150 of hard currency to an exchange,
later withdrew $100 back, then later sent another $75 in. So my Maximum
account value for 2017 at that exchange would be $150. Note (due to my
interpretation of Ms. White of IRS’s message) I am ignoring any
conversions into and back out of cryptocurrency I made to that money
while it was sitting on that exchange, nor any transfers of
cryptocurrency in and out of that exchange. I am only recording hard
currency transfers, be they in U.S. dollars, Mexican pesos, etc. (Of
course finally expressed on the FBAR in U.S. dollars per end of year
exchange rates.)

Case II: SomeExchange offers instant conversion: you wire hard currency
to a special bank account number of theirs that they tell you. And the
moment it hits that account it becomes e.g., bitcoin sitting in your
account there, etc. One might argue that at no time was any hard currency
present on my account there. But just the same I would list it on FBAR
exactly like Case I, as that would better match what IRS has in their
records, if any, of hard currency transfers.


#56

Thanks for the link! Do you know if they have experience with reporting cryptocurrency before? Using Coinbase as an example in the article of a non-US exchange and spelling “Crypto-Currency” with a hyphen is a little disconcerting. But if they do, I may have a client who specifically needs a tax attorney.

I do like his explanation of IRS Offshore Voluntary Disclosure program. It’s worth noting that the IRS has announced they plan to end this program soon (WATCH OUT!) so it’s best for people to take advantage of it sooner than later.

https://www.irs.gov/newsroom/irs-to-end-offshore-voluntary-disclosure-program-taxpayers-with-undisclosed-foreign-assets-urged-to-come-forward-now


#57

Hey so I haven’t filed my official tax return and FBAR yet because I requested an extension due to this whole FBAR confusion and I wanted to get some clarity on the final conclusion you came to if you wouldn’t mind.

So it looks like Ellen White was basically saying that you don’t have to report any crypto that you have sitting on a foreign exchanges even if the total “worth” of those coins exceeds the FBAR limit of 10,000USD. You would only have to report any actual USD that you have sitting on one of those foreign exchanges if the amount is more that $10,000. Is this correct?

So two scenarios, are my FBAR filing conclusions correct for each?:

(1) You buy $20,000USD worth of BTC on Coinbase (not foreign) and transfer that BTC to Binance (foreign). You then buy and sell a bunch of BTC coin pairs but never have any USD on Binance. Eventually you send that BTC back to Coinbase and cash out to USD there. In this case, you would not have to report anything on an FBAR because you never had any USD on Binance, correct?.

(2) You deposit $20,000USD directly onto Binance (I think they offer USD deposits now) and proceed to buy BTC/alts with it. You would have to report the 20,000USD on an FBAR (or the highest USD amount you have on there if you end up selling that BTC/alts on Binance for a profit). Correct?

I appreciate your work on this. Thanks.


#58

I can’t help any more. It would be best if you called Ellen at her phone number there in the letter, or ask her in writing.


#59

Let’s see: Apparently you have read through the conversation and understand what Ms. White has said.

Scenario 1: The US-purchased crypto is transferred to an offshore entity and eventually repatriated. You never go over $10,000 in any foreign fiat currency while the crypto/ cash assets are offshore. Conclusion: No FBAR reporting is required. Oh, and the part about

is irrelevant. You could have $15,000 in any fiat or other type of qualifying investment between trades and be subject to the reporting requirements. It’s not just USD.

Scenario 2: Wired US currency is used to purchase cryptocurrency at an offshore brokerage. If the dollar funds were not liquidated into crypto on the day of their arrival you have exceed the $10,000 reporting cap for funds held offshore and you must file an FBAR. In this scenario, if it’s sent in one lump sum, the bank is also going to send the US Treasury department a report of funds sent to a foreign entity so make sure you file an FBAR to explain what you have done.


#60

Just to reiterate: The assets held offshore don’t just include USD. Reportable asset types include Forex, real estate, pension funds, trusts, cars, collectibles, etc.

The instructions for the form are at: