How Would the IRS Find My Cryptocurrency and Other Offshore Accounts and Investments?
We are often asked: “How would the IRS find my cryptocurrency and other offshore accounts and investments?”
Did you know that every bank, every financial institution, every foreign sovereign tax authority and now cryptocurrency exchanges around the world provide electronic information directly to the IRS on every US taxpayer with offshore accounts, assets and/or financial transactions? Did you notice the recent addition to the IRS tax reporting forms asking the direct question of whether or not you had any financial interest in virtual currency?
In the most recent tax year, the IRS added an important question for all US taxpayers to answer at the top of IRS Forms 1040, 1040-SR and 1040-NR:
“At any time during 2021 (2022, etc), did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”
At the end of these tax reporting forms, the US taxpayer is required to sign the return under the following warning:
“Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct and complete.”
Therefore, any US taxpayer with offshore cryptocurrency or NFT investments who fails to correctly answer that question and signs a tax return which does not accurately or fully disclose the existence of or income from offshore financial activities with crypto and associated exchanges is not only guilty of perjury, but faces substantial financial risks and even the potential for jail time as a result of tax evasion.
It doesn’t matter how “small” you perceive your holdings to be. The failure to accurately and fully disclose your interests and activities alone can expose you to genuine and substantial legal and financial risks.
The One Piece of Information Most US Taxpayers and Crypto Investors Don’t Know
Have you been asking yourself “How Would the IRS Find My Cryptocurrency and Other Offshore Accounts and Investments?”
The one piece of information most US taxpayers and crypto investors don’t know is this:
The IRS is receiving electronic data reflecting all offshore financial accounts, investments and transactions associated specifically to individual US taxpayers from many offshore sources including, but not limited to:
- Foreign Banks
- Investment Houses
- Sovereign Tax Authorities
- Cryptocurrency Exchanges
The greatest risk for any investor in cryptocurrencies or NFTs relates to international reporting requirements established many years ago under FATCA. FATCA is basically an international agreement to identify and disclose information about individuals and entities to their sovereign tax authorities.
FATCA is the answer to the question “How will the IRS find my cryptocurrency and other offshore accounts and investments?”
The United States Government was tired of US taxpayers using Swiss bank accounts and complex strategies based out of the Cayman Islands or Far East designed to hide income from the IRS. FATCA forced an international change:
If you want to do any form of business in or with the United States you must disclose specific details about US taxpayers and their accounts, assets and transactions around the world. The US targeted and pursued the largest Swiss banks, who quickly folded under the legal and financial pressures. Since 2015, the vast majority of banks, financial institutions, investment houses, sovereign nations and now cryptocurrency exchanges around the world have complied with these reporting requirements under FATCA.
There is simply no place to hide. Any information to the contrary is simply at least uninformed.
Are you willing to risk your money, investments and potentially your own personal freedom? Are you willing to face the full strength of the IRS as well as California and other state tax agencies as they pursue you with audits, liens on your assets, levies on your financial accounts and garnishment of your wages? It’s time to learn about the IRS Voluntary Disclosure Program for cryptocurrency and NFT investors as well as those with offshore assets, accounts and interests.
Resources
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Practices Areas
Download the Allen Barron Crypto Reporting Guide
Learn more about your responsibilities as a US taxpayer when it comes to reporting onshore and offshore Cryptocurrency and NFT assets and accounts.
Contact Us To Learn More About Allen Barron's Domestic and International Tax Services for Cryptocurrency Investors and answers to your question: "How Would the IRS Find My Cryptocurrency and Other Offshore Accounts and Investments?"
For more information or to discuss your tax, legal and accounting needs contact Allen Barron or call 866-631-3470 to schedule a free and confidential initial consultation. Learn about the importance of integrated business strategy and coordination across legal, tax and accounting systems.
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