FORBES: Bitcoin Is Not Anonymous, Is Always Taxable AND You May Have to File a FBAR with the IRS If You Own Bitcoins

I have always understood the tax consequences of Bitcoin and that it isn't anonymous, but that a FBAR report may have to be filed by holders of Bitcoin was something I hadn't considered. Cameron King of Forbes makes a strong case here that the IRS could very well hold that owners of bitcoins need to file an FBAR,if they hold more than $10,000 i bitcoins.

He writes:

Bitcoin is surrounded by questions.  While I can’t answer most questions, I can answer the questions related to tax.  The most important answer is yes – bitcoin is entirely taxable and no it is not anonymous[...]

The beauty of bitcoin is that it’s distributed and there’s a public record of every transaction.  Thus, every transaction is always recorded.  It’s like an accountant’s wet dream – debits and credits everywhere.  Some may say that their identities are “hidden” or “obscured,” but that really doesn’t matter unless you’re actively trying to hide the fact that you earned income.  If so, then we’re talking about something entirely different.  That is tax fraud – plain and simple.  You’re attempting to defraud the government of its fair share of your gains.

Bitcoin is taxable, whenever a taxable event occurs.  A taxable event is whenever you cash out your bitcoin for any fiat currency (dollars, euros and etc.) or when you trade a bitcoin for anything (bartering).  In taxation, bitcoin is best understood as an “asset.”  Whenever you hold an asset, it can increase or decrease in value.  When you trade the bitcoin for fiat currency, then you’re trading an asset for dollars.  It works the same way as when you trade gold bullion for dollars[...]

Bitcoins are everywhere and possibly nowhere.  The problem with bitcoins is that it could be argued by the IRS that it is a value held overseas.  The burden of proof is placed upon the taxpayer (AKA you).   Unless you’re able to prove that your “bitcoins” are within the United States, then you may be required to file FBARs.  The FBAR rules requires any United States person with at least one financial account outside the United States and has over $10,000 dollars in aggregate value overseas at any time to file.  The penalties can be the greater of $100,000 dollars or 50% of the value underreported.  It’s worth mentioning that owning 10 bitcoins or more would be more than the $10,000 dollar threshold.