The Internal Revenue Service has said that taxpayers need not report bitcoin holdings on FinCEN Form 114 (Report of Foreign Bank and Financial Accounts – also known as FBAR) this tax season.
The news comes from Rod Lunquist, who’s a senior program analyst for the Small Business/Self-Employed Division at the Service, but added that the exception might end in the future as the authority monitors developments in the space.
“At this time, FinCEN has said Bitcoin is not reportable on the FBAR, at least for this filing season,” said Lundquist during a webinar, as first reported by Bloomberg BNA.
In order to remain compliant with tax laws, individuals who hold $10,000 or more in foreign financial accounts are required to use Form 114 and submit that information to FinCEN — the Treasury’s Financial Crimes Enforcement Network.
The Internal Revenue Service continues to monitor the spectacular growth of digital currencies, and earlier this year issued a controversial guidance on the reporting of digital currency for federal tax purposes.
In that guidance, the Service made the following points:
- Virtual Currency not treated as currency that can generate foreign currency gains/losses
- Taxpayers are liable for determining the fair market value of their virtual currency
- Taxpayers must report gains/losses upon exchange from virtual currency to fiat currency, for example
- Miners must report mined coins at fair market value upon receipt
- A miner’s income is subject to self-employment tax
- Virtual currency paid as wages is subject to federal income tax withholding
- Payments made using virtual currency are subject to information reporting
- Payments made using virtual currency are subject to backup withholding
- Taxpayers not in compliance with the notice are subject to penalties
The taxation landscape that surrounds bitcoin and digital currency is ever-changing, and the possibility things will change by next season seems likely.
[textmarker color=”C24000″]Source[/textmarker] Bloomberg BNA
