Without realizing it, each U.S. taxpayer provides anti-money laundering information to the IRS each year.
How?
At the bottom of Schedule B, there is a question asking if you have a financial interest in or signature authority over a financial account in a foreign country – yes or no. This question explores whether the taxpayer has an anti-money laundering obligation.
Even an account at a non-U.S. crypto exchange is considered a foreign financial account that must be reported.
READ MORE: Do I Need My Crypto Taxes Fixed?
Reporting Your Anti-Money Laundering Forms
Foreign financial accounts are reported on two forms. The first is called FinCEN Form 114 (nicknamed FBAR). The second is IRS Form 8938. Also reported on Form 8938 are all financial transactions like buying or selling/exchanging cryptos.
TAX TIP: I usually aggregate the totals of all transactions instead of itemizing them.
The FBAR form is technically not an IRS form, but the IRS is responsible for administering the collection of the form. Click here for the latest version of the FBAR form and the system for filing and submitting it.
Click here to access Form 8938 if it is not supported by your tax software. This form is filed with the 1040 tax return form.
Photo by Kelly Sikkema on Unsplash
Both of these forms are usually due on tax day, April 15th, or on October 15th if you properly filed an extension. Failure to file these forms on time is an automatic $10,000 penalty per form.
The only way to avoid this penalty if you haven’t filed these for past tax years is to file using tax amnesty.
Learn about how to do the tax amnesty process with our Crypto Tax Fixer Package.
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Featured Image Photo by Kelly Sikkema on Unsplash
