BITCOIN ACCOUNTS MAY BE SUBJECT TO F.A.T.C.A. AND F.B.A.R. REPORTING
Bitcoin and other virtual currency accounts held in foreign exchanges may be treated as a foreign financial account and thus be subject to F.B.A.R. reporting. Eventually, it is even possible that the foreign exchanges themselves may be considered foreign financial institutions (“F.F.I.’s”) that have to report the accounts to the I.R.S. under F.A.T.C.A.
This view follows caselaw where a court found that online accounts held for the purpose of foreign online gambling had to be reported on an F.B.A.R.
Currently, the I.R.S. treats virtual currency as property. However, some claim that it is only a short hop to apply the court's ruling in the online gambling case to digital currency accounts.
Speaking at the fall meeting of the American Bar Association Section of Taxation, a senior I.R.S. official said the I.R.S. doesn't have a stance yet on whether the currency is subject to F.B.A.R. or F.A.T.C.A. reporting, even though the agency is well aware of the issue.
RELAXED DEADLINE FOR REPORTING ACCOUNTS AS PRE-EXISTING
On November 17, the I.R.S. published a corrected amendment under which F.F.I.’s can treat all accounts that were opened before the date on which the F.F.I. signed an agreement with the I.R.S. to participate in F.A.T.C.A. (an “F.F.I. Agreement”) as pre-existing accounts for 2014 reporting purposes. Before this announcement was made, only accounts opened on or before June 30, 2014 were treated as preexisting accounts.