Cryptocurrency and FATCA, a clusterf*** (US)

I attended two days of IRS seminars, and what I heard was even more upsetting than their message in 2017.
In 2017 IRS stated that §1031 didn’t apply to crypto exchanges, and therefore every transaction between currencies was a taxable event (reportable). This includes using your bitcoin wallet to buy a pizza; put it on your schedule D. maddening.
This year now they are telling us that since cryptocurrency has no situs in the US, that it is reportable and subject to FATCA requirements. I asked if this was based on the origin of the currency or the location of the business that holds the ‘wallet’. They were still unsure. In short, this means we have a little time before they can enforce it if they don’t yet know wtf they are talking about. BUT we know that IRS, as an institution is dumb as a box of rocks, so don’t think that logic will prevent them from trying to enforce this and sticking folks with a lot of egregious arbitrary penalties. Maybe in 2020 or 2021, your bitcoin wallet will be considered a foreign bank account and you will have to include it on your FinCEN filings.

2 Likes

FATCA sucks. I avoid it by using my Taiwanese passport and holding everything in my Taiwanese bank. This is why I don’t believe in crypto anymore, it’s main value was being unregulated off the governments radar. Now it’s not. My only regret is spending my bitcoins on weed instead of saving it.

Thanks for the heads-up. I kind of figured this was coming.

Sounds like a pretty expensive smoke! Why so keen to avoid FATCA though? Maybe your situation is beyond me, I’m not sure what you could be out by doing so, but if they ever find out they don’t like it. I had a friend get into trouble over it in really petty circumstances.

Complications and paperwork. It’s just simpler to open a bank account with my Taiwanese passport. Banks are annoyed by it too so they don’t mind.

Filing is a breeze. Its the penalties incurred because someone didn’t know that they were supposed to do it. US$10k each offense.
Well at least I have job security. But I tell you what, I’d flip burgers if IRS and FinCEN would burn.

Just because they aren’t reporting it, doesn’t mean that this is acceptable to IRS. I’m not judging, I just wanted to give you a heads up that you are in fact, out of compliance if you haven’t renounced US citizenship and it is over $10k

2 Likes

I will once I start working. For now, I don’t because I still use family money mostly while I’m doing full time at Uni. And my dad never reported his salary in Taiwan to the IRS. Only his salary from the US. So I don’t want them snooping around wondering where the money I get comes from.

Thank you for your honesty and the cautionary tale. :+1:

That’s interesting. Last I heard, the legal status of all crypto in Canada was that it’s a commodity.