Disclosure has become more complex with the rise in popularity of digital currency.
Bitcoin is a decentralized form of currency. This means that it is not regulated by a country, it has no central authority, and is not subject to taxation as a currency, but is to be taxed as a property in the US. Recently, a senior IRS analyst declared that taxpayers will face no penalties for not reporting ownership of Bitcoins on the FinCEN form 114.
FinCEN, or Financial Crime Enforcement Network, requires that form 114 (Report of Foreign Bank and Financial Account – FBAR) be filed when a taxpayer holds $10,000 or more in a foreign bank. Further, Bitcoin holders do not even face reporting requirements.
Bitcoin has found favor with those that wish to keep their financial records anonymous. However, this anonymity has been the subject of worry for many US officials. It has been discovered that there are various ways individuals can hide their true worth from the IRS and other interested parties, such as courts, through exchanging cash for digital currency.
This model allows cryptocurrency to remain hidden and off the books, due to the nature of being decentralized. In spite of this, courts are now expanding the range, depth, and scope of certain orders, such as search and discovery orders, to include digital currencies.
While courts struggle to stay ahead of this technology, certain individuals are exploiting the loopholes and using them to their advantage. While officials debate as to how digital currencies such as Bitcoin should be regulated, divorce settlements can be affected through false financial disclosures. Keen attorney’s may be able to prevent these situations, however, with the assistance of those knowledgeable of their spouses financial worth, holdings, and practices.
With the help of a court mandated search and discovery order, these financial records may be exposed. It is always in the best interest of the individual with these concerns to consult an experienced divorce attorney. Depending on how much documentation can be provided, the value of the documentation, and the actual location of the currency, it may be able to be retrieved and allocated according to the court order.
The new age of digital currency is creating many concerns in matters of law and legality. It is a hot topic among law and policy makers around the world. Some countries have accepted and adopted its use labeling it, “private money”. Other countries see cryptocurrency as a threat to their domestic policy, and are pushing for its banishment or extreme regulation. Until the US figures out a way to deal with this rise of private money, courts and divorce attorneys are thinking outside the box in an attempt to quell the concern of false financial disclosures in order to prevent an unfair final divorce settlement.
Jeff Hughes, J.D.