Does the IRS Target Expats with Coinbase Accounts?
Expats with Coinbase accounts need to know that they are accountable to the same reporting guidelines as U.S. residents and, in some cases, additional rules. Because of that, expats can sometimes get more easily targeted by the IRS for issues reporting their Coinbase accounts.
Recently, Coinbase began sending information about its users to the IRS. This change has made it easier for the IRS to target expats with Coinbase accounts for issues on their tax returns. Generally, the IRS will target expats with Coinbase accounts who improperly report capital gains from crypto sales and, in some cases, those who receive a portion of their income through crypto and fail to report it. There are also additional filing requirements for expats with Coinbase accounts that can cause issues, like IRS Form 8938.
US Tax Help understands how difficult it can be for expats to keep up with the changing filing requirements for Americans with Coinbase accounts. To learn more about the CPAs for American expatriates at US Tax Help, call us today at (541) 362-9127.
How Can the IRS Target Expats with Coinbase Accounts?
Because cryptocurrencies are a relatively new phenomenon, the IRS is still changing its rules about reporting crypto. Recently, Coinbase began sending information to the IRS regarding its users. This is the primary way the IRS can target expats who are unaware that they had to pay taxes on the funds in their Coinbase accounts.
Beginning in 2017, Coinbase began reporting information about its users, domestic and abroad, to the IRS. Coinbase does this by sending the IRS a copy of Form 1099-MISC for each American trader who made more than $600 in crypto rewards during the tax year. This applies to expat traders who retain their American citizenship as well. This new protocol came after the IRS noticed irregularities between taxpayers’ tax returns and the growing popularity of cryptocurrencies.
Because of this, the IRS gets information regarding your Coinbase account before you even file your taxes. This makes it even more crucial for citizens abroad with foreign Coinbase accounts to hire a CPA for American expatriates. Reporting your crypto earnings and sales can be difficult, especially if you live overseas and are unfamiliar with rules regarding reporting Coinbase accounts to the IRS.
When Can the IRS Target Expats with Coinbase Accounts?
The IRS can target expats with Coinbase accounts when they improperly report their cryptocurrency transactions and sales throughout the tax year. Generally, the IRS has very strict rules regarding American money overseas. Especially because cryptocurrency is still a somewhat new financial asset, the IRS will target expats with foreign Coinbase accounts who don’t adhere to reporting guidelines.
Reporting Capital Gains
If you have a Coinbase account as an American expat, you might be wondering if the IRS will begin targeting you. The first reason you might incur financial penalties or repercussions from the IRS is if you improperly report the capital gains from your Coinbase transactions. American expats living overseas must still adhere to reporting guidelines for capital gains, even if they no longer reside domestically. This can be frustrating and unclear for expats when they first move overseas, so it’s wise to hire an accountant.
There are two types of capital gains taxes that apply to the funds earned from Coinbase sales. The first is short-term capital gains, and the second is long-term capital gains. Depending on how long you held crypto in your Coinbase account before you sold it, you will be responsible for paying one of the two types of capital gains tax on your earnings, even if you live overseas. If you don’t, the IRS may target you.
Increasingly, it has become more popular for companies to pay their employees using cryptocurrency. If you receive a portion of your income through your Coinbase account, you will have to report it to the IRS. This is true even if you live abroad, as American expatriates are taxed on their worldwide income.
This can be confusing for expatriates, as the IRS previously only recognized cryptocurrency as property and not as cash. However, if you receive some of your income through your Coinbase account, that must be included on your annual tax returns as part of your worldwide income. Remember, the IRS receives information from Coinbase regarding your account, so it’s important to hire a CPA for American expatriates so that you don’t get targeted for improper reporting.
Reporting Foreign Financial Assets
If you hold cryptocurrency in a Coinbase account and live overseas, you may need to file Form 8938 with the IRS. The IRS can target you and apply financial penalties if you don’t. The IRS likes to keep tabs on American money and assets overseas, so expats will likely have to report their foreign financial assets using Form 8938 if they exceed a certain amount. This includes the funds in your Coinbase account.
Remember, cryptocurrency is often considered property in the IRS’s eyes. Because of that, cryptocurrencies will likely be considered foreign financial assets when held in a foreign Coinbase account. If you don’t have a CPA for American expatriates and are unaware that you have to report your Coinbase account using Form 8938, you could get targeted by the IRS.
How Can Expats Avoid Getting Targeted by the IRS for Coinbase Accounts?
Getting targeted by the IRS isn’t an enjoyable experience. It could result in expats incurring substantial financial penalties and an audit of their personal finances. To prevent such a headache, expats should hire an experienced accountant. That way, you can file on time and properly report your Coinbase accounts to the IRS.
The best way to avoid getting targeted by the IRS for your foreign Coinbase account is to file properly and file on time. Abiding by the IRS’s rules for expats is crucial, though following the guidelines can be difficult if you live overseas. Not to mention, the rules regarding cryptocurrencies and Coinbase accounts seem to be ever-changing.
Since cryptocurrency is still an evolving discussion for the IRS, it’s best to leave it to an accountant. Our CPAs for American expatriates can handle properly reporting your Coinbase accounts so that you can prevent getting targeted by the IRS.
Our Accountants Can Help Expats Report Their Coinbase Accounts
If you’re an expat with a Coinbase account, our accountants can help you properly file your tax returns so that you don’t get targeted by the IRS. To learn more about the CPAs for American expatriates at US Tax Help, call us today at (541) 362-9127.