Is Cryptocurrency Reported on Form 8938?
Moving overseas doesn’t absolve U.S. citizens from paying taxes. It also doesn’t excuse them from reporting their financial assets. Currently, the IRS views cryptocurrency as property. Because of this, it’s important for American expatriates to understand whether they may have to report it on Form 8938.
The IRS requires foreign-held or -acquired cryptocurrency to be reported on Form 8938. While the filing threshold is higher for American expatriates, the need to file often applies to expats, especially. That’s because expats often have more aggregate foreign financial assets than citizens who live in the United States. Understanding how the United States tax code applies to your cryptocurrency holdings as an expatriate can help you avoid fines and penalties from the IRS.
The CPAs for American expatriates at US Tax Help can make tax season easier while living abroad. Our certified public accountants can inform you on which new IRS forms apply to you as an expat. To understand how to report cryptocurrency on Form 8938, visit us online or call the CPAs for American expatriates at US Tax Help today at (541) 362-9127.
How Is Cryptocurrency Reported on Form 8938?
The IRS views cryptocurrency as property as opposed to actual cash. IRS Form 8938 requires American citizens, including expatriates, to report their foreign financial assets each tax year. While laws for cryptocurrency are still evolving, it’s important for expatriates, especially, to know whether or not they must report their cryptocurrency on Form 8938.
Do Americans Living Abroad File Form 8938?
While many United States citizens must complete Form 8938 to report their foreign financial assets, this rule often applies to American expatriates. That’s because expats are much more likely to have foreign financial assets as they live abroad. Cryptocurrency is viewed as a financial asset like property or stocks rather than cash. That’s why cryptocurrency isn’t typically reported on your federal tax return (unless you get your income paid in cryptocurrency or get income from selling cryptocurrency). However, part of your tax return includes Form 8938, if it applies to you.
Many American expatriates might not know they still need to pay United States federal taxes, let alone understand the complexities involving cryptocurrency and Form 8938. Further, you only have to file Form 8938 if your foreign financial assets surpass a specific amount. While it might seem confusing, an accountant, like the CPAs for American expatriates at US Tax Help, can make it easier to understand.
Threshold for Form 8938 Requirements
American expats filing independently have to report foreign-held or -acquired cryptocurrency if their total foreign financial assets exceed the threshold set by the IRS. For example, you must file Form 8938 if your foreign financial assets are above $200,000 on the final day of the tax year or $300,000 at any point of the tax year. American expats filing jointly must report cryptocurrency on Form 8938 if their total foreign financial assets are above $400,000 on the final tax of the tax year or $600,00 at any point during the tax year.
Because cryptocurrency is a relatively new phenomenon, American expats can be unaware of the tax filing requirements of owning it. That’s why it’s beneficial to enlist the help of an experienced accountant, like the CPAs for American expatriates at US Tax Help. American expats should know that failure to report cryptocurrency on Form 8939 could result in fines and penalties from the IRS.
Why Is Cryptocurrency Reported on Form 8938?
So, why is cryptocurrency reported on Form 8938? After all, this form is meant to account for financial assets, like property and stocks. Isn’t cryptocurrency a form of currency? In the eyes of the IRS, it’s not. Instead, cryptocurrency is considered property. This can be confusing for anyone, especially American expatriates whose tax filing requirements have changed since moving overseas.
While cryptocurrency can be a form of payment, it’s much more complex than the average dollar. Cryptocurrency is used digitally as an alternative to the payment system many are familiar with. People buy cryptocurrency because of its potential to grow in value rather than its initial monetary worth. Because of the likely profit from owning crypto, and its other features, it’s considered property instead of cash. Say you acquire or hold cryptocurrency in a foreign country. In that case, it is reportable on Form 8938, like any stocks, bonds, or properties are.
Because cryptocurrency is new, the IRS and U.S. government are still determining how to approach it. As of now, cryptocurrency is deemed property and must be reported on Form 8938 by American expatriates if their total foreign financial assets exceed a certain amount. However, as the IRS shapes its view on cryptocurrency, tax filing laws could change. For Americans living overseas, it can be beneficial to have the guidance of a knowledgeable accountant, like the CPAs for American expatriates at US Tax Help. That way, should these laws change, you can know how to report your foreign financial assets when tax season rolls around.
The IRS keeps tabs on United States money overseas. According to FBAR, or the Report of Foreign Bank and Financial Accounts, American citizens must report assets held in foreign accounts. While the IRS does consider cryptocurrency property, it is also not a tangible item. Like other financial assets, people can hold cryptocurrency in bank accounts. Therefore, you may also have to file Financial Crimes Enforcement Network Form 114 in addition to IRS Form 8938 if the total value held your foreign bank accounts exceeds $10,000. Because cryptocurrency can grow in value, American expatriates should stay up to date on the value of the cryptocurrency held in their foreign bank account.
Our CPAs Can Help You Report Cryptocurrency on Form 8938
Taxes are confusing enough, and moving abroad doesn’t make them any simpler. For help reporting cryptocurrency on IRS Form 8938, visit our website or call the CPAs for American expatriates at US Tax Help today at (541) 362-9127.