Why US Citizens Do NOT Have to File TD F 90-22.1 (FBAR) for Mt. Gox Accounts

[bitcoins5411]

The end of the year is approaching and I almost had more than $10,000 USD in my Mt. Gox account this year, so I was reviewing my tax situation with respect to Mt. Gox and whether I will need to start filing an FBAR in the future. First, a disclaimer. I am not an accountant and you can't rely on this. But I'll share my opinion.

All my deposits to Mt. Gox were made from my Dwolla account to Mutum Sigillum LLC, which is a company that is domiciled in the United States and has the following address: 2915 OGLETOWN ROAD, #1085, NEWARK, DE 19713.

So in my view, I never deposited the funds with a foreign financial institution. This is the same thing as when I deposit my funds Citibank. I don't know whether Citibank keeps those funds in the USA or they send them abroad. That's their business. But my deposit was done in the United States, so my view is that no FBAR is required for me.

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[koin]

I never deposited the funds with a foreign financial institution.

you probably are ok on the part that mt. gox isn't a financial institution.

but what if you had handed more than $10k in cash to a foreign broker who came to your office.    though you weren't the one that transferred the funds abroad you still would be expected to report on fbar.

[Yuhfhrh]

The end of the year is approaching and I almost had more than $10,000 USD in my Mt. Gox account this year, so I was reviewing my tax situation with respect to Mt. Gox and whether I will need to start filing an FBAR in the future. First, a disclaimer. I am not an accountant and you can't rely on this. But I'll share my opinion.

All my deposits to Mt. Gox were made from my Dwolla account to Mutum Sigillum LLC, which is a company that is domiciled in the United States and has the following address: 2915 OGLETOWN ROAD, #1085, NEWARK, DE 19713.

So in my view, I never deposited the funds with a foreign financial institution. This is the same thing as when I deposit my funds Citibank. I don't know whether Citibank keeps those funds in the USA or they send them abroad. That's their business. But my deposit was done in the United States, so my view is that no FBAR is required for me.

You make a good point, but what if you sold $10,000 worth of bitcoin that you mined and the cash is in your exchange account? Does Mutum Sigillum handle all USD for MtGox?

[bitcoins5411]

Those are both very good follow-up questions.

I think in the foreign broker situation, the broker is acting as a courier. So my money is still going to the foreign account, so FBAR is needed. In the case of Mt. Gox, I am making an electronic bank deposit to a USA-based company. So I think it is a different situation. The deposit is taking place in the USA and with a USA company.

The selling of bitcoin raises interesting questions. Because if I cash out through Dwolla the funds also come back to me from Mutum Sigillum LLC. This leads me to believe that US Citizens using Mt. Gox can very easily make the argument that our accounts are domiciled in the United States, even if Mt. Gox's HQ is in Japan.

[hanwong]

You are complicating the issue. You are required to file an FBAR simply for the fact that you have active control over an account which is housed in a foreign financial institution. Mt Gox is registered in Japan as a financial institution. Your name is on the Mt Gox account and you have control over that account. Therefore you must file the FBAR if your account is worth more than 10K st any point during the year.

I am an enrolled agent and hope that this viewpoint has been of value to you.

[bitcoins5411]

Mt. Gox is transitioning all US customer funds to the USA in March, so this is no longer an issue.

[BTCdude007]

So, what is the final word on the requirement to file FBAR for Gox account?

Has anyone actually filed the FBAR for 2012 (due date Jun 30)?

[repentance]

FATCA has three main provisions:
It requires foreign financial institutions, such as banks, to enter into an agreement with the IRS to identify their U.S. account holders and to disclose the account holders' names, TINs, addresses, and the accounts' balances, receipts, and withdrawals.[11] U.S. payors making payments to non-compliant foreign financial institutions are required to withhold 30% of the gross payments.[12][13][14] Foreign financial institutions which are themselves the beneficial owners of such payments are not permitted a credit or refund on withheld taxes absent a treaty override.[15]
U.S. persons owning these foreign accounts or other specified financial assets must report them on a new Form 8938 which is filed with the person's U.S. tax returns if they are generally worth more than US$50,000;[16] a higher reporting threshold applies to overseas residents and others.[17][18] Account holders would be subject to a 40% penalty on understatements of income in an undisclosed foreign financial asset.[13][19] Understatements of greater than 25% of gross income are subject to an extended statute of limitations period of 6 years.[20]
It closes a tax loophole that foreign investors had used to avoid paying taxes on U.S. dividends by converting them into "dividend equivalents" through the use of swap contracts.[21][22]
These reporting requirements are in addition to reporting of foreign financial accounts to the U.S. Treasury;[23] this most notably includes Form TD F 90-22.1 "Report of Foreign Bank and Financial Accounts" (FBAR) for foreign financial accounts exceeding US$10,000 required under Bank Secrecy Act regulations issued by the Financial Crimes Enforcement Network (FinCEN).[24]

http://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act#Provisions

Japan has agreed to implement FACTA, so be aware that this may result in your MtGox accounts being reported to the IRS and the US Treasury.  

It's generally not a good idea to rely on interpretations of taxation law which you've come up with yourself.

Dwolla doesn't keep your funds on MtGox (in fact Dwolla's ToS specifically state that user funds are deposited with Veridian).  It transfers them there on your explicit instructions.