Not Filing Anti-Money Laundering Forms Could Cost You $10,000 or More

Filing anti-money laundering forms may be applicable to you. To not be penalized, learn more about what forms are involved and how to file them.

Without realizing it, each U.S. taxpayer provides anti-money laundering information to the IRS each year.


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.

anti-money laundering

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.

Not Sure If Your Taxes Need Fixed?

Take our crypto tax health check now. 

Featured Image Photo by Kelly Sikkema on Unsplash

9 Important Things to Know About Blockchain

Blockchain is to bitcoin what the Internet is to e-mail. Even if you’re not ready to use digital currency, you can benefit from understanding this new technology.

Technology is changing at such a fast pace that it can be difficult to keep track of everything in the news. Some of those technologies will survive, others will be reconfigured and still others will fail.

Some Background On Blockchain

Blockchain is one technology that will continue to thrive. It has been around since 2008, when it was first introduced along with bitcoin, a digital currency (aka a cryptocurrency).

Despite some glitches along the way, both blockchain and bitcoin have flourished since they were first introduced, and both have become relevant to many industries, including health care, insurance and transportation.

Unlike Bitcoin, however, which has been joined by a number of other alternative currencies, blockchain remains the main underpinning of all of them as well as of other applications.

How Blockchain Works

At a time in which data management and security has become a primary concern of all business sectors, blockchain has emerged as a safe way to digitally record and memorialize financial transactions without needing centralized third-party authentication.

Bitcoin still is the leading digital currency. Like the paper money and coins, bitcoin’s value stems from the fact that it can be used to buy goods and services. Bitcoin (or any other digital currency) and blockchain work together. Here are nine things you need to know:

  1. A digital file called a “ledger” is used to keep track of your bitcoin.
  2. Your ledger is distributed across a network of private computers (called “nodes”).
  3. Every time you initiate a transaction, every node in the network is notified so it can update the balance in your ledger using your public key.
  4. Blockchain does not keep track of your balance; it only tracks the transactions you make.
  5. Your bitcoins are kept in a “wallet” that is encrypted with a specific public key as well as an encrypted private key. Only you can use your private key to encrypt and decrypt your transactions.
  6. You can have as many wallets as you wish. Each has its own private and public keys.
  7. Every time you use your private key you generate a digital signature, and blockchain uses that signature to verify your transaction. This signature changes every time you initiate or change a transaction. This makes it impossible to change a recorded transaction.
  8. Transactions are grouped into blocks. Each block contains a set number of transactions and a link to the previous block.
  9. The blocks are organized in a time-related chain and connected through cryptography that relies on special mathematical functions and codes. Every transaction in each unique block is considered to have happened at the same time.

Benefits Of Blockchain

Blockchain has many benefits, including the following:

  • Value (bitcoin or another cryptocurrency) can be transferred within a few minutes and secure within a few hours.
  • Transactions are transparent because anyone can verify any transaction at any time by following its trail along the blockchain.
  • Transactions are private: only you have the private key to your wallet.

Also consider the following:

  • No centralized entity oversees the transactions, so there is no help desk to call if you need help. You alone control your account. Transactions are not secured by an entity like the Federal Deposit Insurance Corporation. If something goes wrong and your digital currency is somehow diverted from your account, you have no recourse.
  • The value of bitcoin and other digital currencies is volatile. Their value isn’t controlled by an entity like the Federal Reserve or the World Bank, which means their value is not as stable as traditional currency.

The growth and evolution of blockchain technology over the past 11 years or so is impressive. To discuss how it may continue to evolve, contact us today.


Featured Image by Hitesh Choudhary on Unsplash

Do I Need My Crypto Taxes Fixed?

Wondering if you need your crypto taxes fixed? Take our downloadable crypto tax health check so you know if your crypto taxes need surgery or not.

Do I need my crypto taxes fixed? Should I fix my tax return to report my cryptos better? Those are the questions that many traders are asking now that the IRS compliance campaign has begun sending letters to traders. For many traders, it was the first time they ever did any investing. Reporting these investments on their taxes was a new awakening for them.

So it is time to do a health check. It makes sense. Every year you go to a doctor to have your body signs checked for hidden problems. We can do the same thing with your tax return.


3 Proven Ways Crypto Traders can Avoid IRS Problems and Slash Their Taxes

3 Proven Ways Crypto Traders can Avoid IRS Problems and Slash Their Taxes

Despite what you may have been hearing, or experiencing, crypto traders can avoid IRS problems. Ideally, you also want to slash your taxes. And you want to achieve both for good reasons. The good news is, it’s possible with these three proven ways.

Many crypto traders have lost assets investing in Ponzi schemes, bogus ICOs, have accidentally locked themselves out of a wallet, have had an exchange close down keeping your coins, and have experienced a phishing scam, etc. Can you relate?

Many people have also heard that the big tax law change in December of 2017 eliminated the personal casualty loss deduction. Consequently, for 2018 and forward, traders thought there were no more deductions for such crypto losses.

However, the tax law differentiates between personal casualty losses and losses of investments entered into for profit. The later is still deductible. Who doesn’t buy cryptos to make a profit? So almost all crypto losses are investment losses.

Investment loss of cryptos divides into two types: loss from fraud (i.e. Ponzi scam, financial fraud, MtGox exchange closures, etc.) and capital loss (lost wallet, lost/stranded coins, etc.).


Crypto Traders can avoid IRS problems

A capital loss is recorded on form 8949 (basis not reported to IRS). Enter the sale price as $0. I also recommend providing a disclosure on form 8275, preferably in the format of a legal affidavit, which is what it is. This type of loss reduces your capital gains.

Read More: Crypto Trader Saves $471,000 on Taxes


Crypto Traders can avoid IRS problems

Fraud losses, on the other hand, are treated as deductions, not capital losses. The challenge of a fraud or Ponzi loss is that you can’t obtain or trust the transaction and inventory records. As a result of the Bernie Madoff Ponzi scam, the IRS created a “safe harbor” method of declaring the loss which reduces your risks of not having records.

The key to the safe harbor rule is showing that the loss occurred in a year during which the operators of the fraud are indicted or sued. So I recommend looking for a dated web news article reporting the indictment or better yet a copy of the indictment.

If the fraud loss wasn’t newsworthy, such as a phishing loss, you can still deduct the loss, but there is no safe harbor defense if audited unless you have records to substantiate your investment basis and loss. The worst case is you lose the deduction claim.


Crypto Traders can avoid IRS problems

A Ponzi loss is recorded on form 4684. The total loss calculated on this form is entered on to Schedule A-Itemized Deductions. The standard deduction is now $12,000 single/$24,000 married. So you can itemize deductions if they exceed the standard deduction. Small Ponzi losses might be inconsequential on a return.

I had one client with a $139,000 Ponzi loss deduction. It completely offset all her taxable income resulting in a $0 taxes owed. Plus she got to carry over the excess as a net operating loss for the next year to reduce that year’s liability too. Sweet!

Important Note: On a Ponzi loss, the safe harbor rule only allows you to deduct your basis or cost of the assets put into the bogus investment. You can’t deduct any alleged appreciation of the investment that may have taken place before the loss. You only get to deduct what you invested.

Read More: Avoiding the IRS Crackdown


As you can see, claiming an investment loss can create a great tax break. It’s also possible as a crypto trader to avoid problems with the IRS. But if you’re still finding it to be a daunting task or your situation is complicated, don’t take the risk or stress yourself out – schedule a call with me now to discuss fixing your crypto tax problems.

Do you want to better understand what all the IRS knows about crypto traders? Check out my books about crypto trading.

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