Murky Guidance on Whether Digital Currency Must Be Included on the FBAR

The IRS has yet to release any formal guidance on whether a Bitcoin account is required to be reported on an FBAR. However, during a recent IRS webinar entitled “Reporting of Foreign Financial Accounts on the Electronic FBAR,” an IRS representative stated that taxpayers do not need to include Bitcoin accounts on their 2013 FBAR. The IRS representative cautioned that the IRS could change this policy in the future, and we further caution that any such informal guidance is not binding on the IRS.
Conversely, a federal district court in California, in a case captioned United States v. Hom, 2014 U.S. Dist. LEXIS 77489 (N.D. CA 2014), recently upheld an FBAR penalty assessment against an individual who failed to report his interest in a FirePay, PokerStars and PartyPoker account. Such decision appears to conflict with the informal IRS guidance on Bitcoin accounts. Individuals with similar online poker accounts should file an FBAR if, at any time during 2013, they had $10,000 or more in the online poker account.
As the use of digital currency continues to increase, the IRS is likely to revisit its guidance and practices. As evident from the recent guidance on Bitcoin and online poker accounts, the rules relating to digital currency are often not intuitive.

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