If you received income from bitcoin or another cryptocurrency, the Internal Revenue Service wants to know about it. In July, the IRS sent more than 10,000 individuals letters who possibly violated tax regulation for cryptocurrencies. Some people thought their capital gains taxes could be differed because the profit came from a like-kind exchange cryptocurrencies, but these gains were not like-kind exchanges in 2018.
Tax specialists are recommending people who got a letter to contact the IRS and not ignore them. It appears as tax fraud to the IRS when people owe $15,000 or more or try to find their cryptocurrency ownership. People who knowingly committed fraud should consult an attorney who specializes in tax fraud. The IRS’s Voluntary Disclosure Program lets people avoid criminal prosecution by paying a hefty civil penalty. People who just made a mistake can see an accountant to help them file an amended return.
The IRS issued a PDF for individuals and businesses which explains how the government assesses a tax on cryptocurrency transactions to buy goods or hold them as an investment. According to the IRS, virtual currency is property. There’s also a section for cryptocurrency miners.
Bitcoin and other cryptocurrencies are drawing the IRS’s attention since they are becoming more popular. In 2018, Coinbase had to turn over information about 13,000 customers to the IRS. In response to their request, the IRS said Bitcoin created billion of dollars of wealth, yet taxpayers did not report a large amount of this wealth to the IRS.
Cyrytocurrency holders who owe the IRS money shouldn’t panic. Seek the advice of a tax attorney if you feel you may owe the IRS money for your cryptocurrency transactions. Coming clean with the IRS almost always results in a better outcome. Failing to respond to their requests or trying to hide assets just makes your problem worse.
