Welcome to the blog of inTAXicating.ca! Since 2008 we've been writing posts to help Canadians solve their tax issues with the Canada Revenue Agency. If you have any questions, or if you need assistance with any CRA matters including, but not limited to; Collections, Enforcement, Audits, Liens, Back-Filing, Assessments, Director's Liability, s160/325, Taxpayer Relief or the Voluntary Disclosure Program. If you have debt and are considering Bankruptcy or a Consumer Proposal, speak with us first. With over 10-years of CRA experience in the Collections division, our expertise is in the diagnosing and solving of the most complex tax problems.
A Popular cryptocurrency exchange, Coinbase, has been forced by a US court order to hand over a list of 13,000 of it’s customers’ names and assorted personal information to the Internal Revenue Service (IRS) so that the IRS can determine who has been reporting their Crypto-Currency transactions and to tax and penalize those who have not.
Coinbase, a San Francisco-based cryptocurrency exchange notified thousands of customers, to provide the IRS with “taxpayer ID, name, birth date, address, and historical transaction records for certain higher-transacting customers during the 2013-2015 period.”
While 13,000 is a lot, if you have used Crypto-Currencies in the US, or in Canada, you might want to get filing, and fast.
Apparently, Coinbase received a summons from the IRS in late 2016 asking for a wide range of records relating to approximately 500,000 Coinbase customers. Coinbase fought this summons in court – not sure if they won and the 13,000 is the win or if that matter is still pending but the 13,000 is a different attempt by the IRS to gather information they are entitled to under the IRC.
Still shocking to us at inTAXicating is how few Canadian and US crypto enthusiasts had even bothered to address the tax issue.
Many on both sides of the border claims that both the IRS and the CRA have been really vague on how they plan to address Crypto-Currencies, however than cannot be further from the truth.
On March 25th, 2014, the IRS issuesd this release; https://www.irs.gov/newsroom/irs-virtual-currency-guidance; and
On March 17, 2015, the CRA issued a release about how the Canada Revenue Agency will be handing Crypto-Currencies and they have been on top of it with the most recent detailed release being January 18th, 2018.
Whether you believe in taxation or that taxation is theft – something brought in from the BNA Act of 1867, or there are privacy rights stemming from the 3rd Amendment in the US, the bottom line is this.
If you don’t report your interactions with these digital currencies, you are going to pay that tax plus penalties and interest. Why give the government more than they are asking for? Include the currencies on your tax return, pay the tax, and be fully compliant.
If you have failed to include your adventures in Crypto-Currencies on your tax returns, you are in trouble. You need to contact inTAXicating and we can assist you in filing your returns to reflect those amounts.
Remember, the CRA’s Voluntary Disclosure Program is changing as of March 1st, 2018. Once that loophile closes, it’s going to be very difficult to get a fair shake from the government.
Don’t wait, hoping there is going to be miracle court order or that the CRA or IRS will decide that they have enough taxes already.
inTAXicating can be reached at firstname.lastname@example.org to book an appointment.
Copy of Court Order;
There’s plenty of misinformation regarding tax preparation and how to report digital currencies, however the CRA and IRS have been very clear.
If you have transacted publicly on any centralized exchanges such as Coinbase and are US or Canadian residents – and regardless of your opinion on the morality of tax – the IRS and the CRA have courts on their side and they can sentence you to jail.
The June 30th deadline to file your Report of Foreign Bank and Financial Accounts, also know as FBAR’s with the IRS is rapidly approaching. If you are a US person and have more than $10,000 in any foreign financial account (or are a signatory authority) then you need to file these by the deadline. These accounts include; bank account, brokerage account, mutual fund, trust, or other type of foreign financial account.
The Bank Secrecy Act requires US persons to report annually to the IRS any foreign financial accounts and their dollar amounts, however, under FATCA, those US persons who have not been doing so, will have their information reported for them by Foreign Financial Institutions (FFI’s) to the IRS and the penalties can be quite large.
If you are an US person, then you are required to submit this filing if;
1. You had a financial interest in, or signature authority over, at least one financial account located outside of the US; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
Stepping back for a second, the IRS through FATCA has provided a clear definition of what constitutes an US Person” and you are an US person for taxation purposes if you are;
• US citizen;
• US resident based on the number of days spent in the US during the year;
• US green card holder (even if the green card has expired);
• US created corporations, partnerships, limited liability companies which were created or organized in the US or are owned by US persons;
• US created partnership;
• US estates and trusts – formed under the laws of the US or created by US persons;
• Virtually everyone born in the US;
These rules also catch those with dual nationality, even if such persons are registered taxpayers in a non-US country (the US considers you “foreign” and asks you to complete a Form W8-BEN) These regulations also can include individuals who were born outside the US but who have at least one US parent.
Worried yet? So now you probably want to know more about when the FBAR’s are due.
The FBAR is due by June 30th of the year following the year that the account holder meets the $10,000 threshold. There are no extensions as there are for US personal tax returns. Filers cannot request an extension of the FBAR due date.
If a filer does not have all the available information to file the return by June 30, they should file as complete a return as they can and amend the document when the additional or new information becomes available.
If you need help filing the FBAR’s you can reach the IRS Monday – Friday, 8 a.m. to 4:30 p.m. Eastern time, at 313-234-6146 for callers outside the US, or send an email to the IRS at FBARquestions@irs.gov. The email system does not accept actual FBAR reports.
Once completed, the FBAR’s are sent to;
U.S. Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621
If an express delivery service is used, send completed forms to:
IRS Enterprise Computing Center
ATTN: CTR Operations Mailroom, 4th Floor
985 Michigan Avenue
Detroit, MI 48226
The contact phone number for the delivery messenger service is 313-234-1062. The number cannot be used to confirm that your FBAR was received.
The FBAR is not to be filed with the filer’s Federal tax return.
Alternatively, a FBAR filing verification request may be made in writing and must include the filer’s name, taxpayer identification number (TIN) and the filing period. There is a $5 fee for verifying five or fewer FBARs and a $1 fee for each additional FBAR. A copy of the filed FBAR can be obtained at a cost of $0.15 per page. Check or money order should be made payable to the United States Treasury.
It is also possible to amend previously filed FBAR’s. It can be done by;
Checking the Amended box in the upper right-hand corner of the first page of the form;
Making the needed additions or corrections;
Stapling it to a copy of the original FBAR; and
Attaching a statement explaining the additions or corrections.
Beginning July 1st, 2013, Mandatory Electronic filing of FBAR forms!
E-filing is a quick and secure way to file FBAR’s and filers receive an acknowledgement of each submission right away.
So if you were required to file FBAR’s and failed to, the consequences can be quite alarming!
Failure to file a FBAR when required to do so may potentially result in civil penalties, criminal penalties or both.
If, as is the case for many Canadians who were not aware of the requirement to file US tax returns, you learned that you were required to file FBARs for earlier years, then you should file the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be asserted if the IRS determines that the late filings were due to “reasonable cause”.
Otherwise, cumulative FBAR penalties can actually exceed the amount in a taxpayer’s foreign accounts under the penalty provisions found in 31 U.S.C. 5314(a)(5).
Keep copies of what you have sent to the IRS, and the supporting documentation, for a period of five years. Failure to maintain required records may result in civil penalties, criminal penalties or both.
The IRS allows filing of FBAR’s back to 2008 on their current form (revised October 2008), and anything older than 2008 can be reported on the FBAR form revised in July 2000.
A spouse having a joint financial interest in an account with the filing spouse should be included as a joint account owner in Part III of the FBAR. The filer should write “(spouse)” on line 26 after the last name of the joint spousal owner. If the only reportable accounts of the filer’s spouse are those reported as joint owners, the filer’s spouse need not file a separate report. If the accounts are owned jointly by both spouses, the filer’s spouse should also sign the report. It should be noted that if the filer’s spouse has a financial interest in other accounts that are not jointly owned with the filer or has signature or other authority over other accounts, the filer’s spouse should file a separate report for all accounts including those owned jointly with the other spouse.
If you are a US person with substantial foreign financial assets, you should know that in 2013, the IRS introduced Form 8938 for you to report with your FBAR’s.
Taxpayers with specified foreign financial assets that exceed certain thresholds ($50,000) must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR. The IRS has provided a chart comparing Form 8938 and FBAR requirements, here.
If you need helping getting compliant, or trying to determine your IRS / FATCA plan of action, all you need to do is reach out to us at Intaxicating Tax Services. With 17-years of Canadian tax experience and 30-years of US tax filing, our team will ensure you provide only what you are required to provide.