After starting the year with a precipitous drop, cryptocurrency markets are starting to bounce back. This year, more and more virtual currency investors are looking at big returns on their crypto assets, and the crypto community is abuzz with exciting new opportunities. However, cryptocurrency income has been massively underreported to the Internal Revenue Service, and now the agency is applying more pressure than ever.
Most of the cryptocurrency community has followed the IRS enforcement action against Coinbase, America’s most popular Bitcoin exchange. Since the tax agency filed suit against them in federal court, Coinbase has fought hard to protect its users’ privacy. However, it appears that the litigation is turning a corner, and Coinbase will soon give up thousands of it’s users to the IRS.
The IRS has lost out on millions of dollars in tax revenue from unreported and under-reported cryptocurrency investment activity. Now, the agency is on the lookout for cryptocurrency investors that are not properly reporting and paying their cryptocurrency taxes. If you bought or sold virtual currencies, be sure to work with a skilled cryptocurrency accountant as you prepare your tax returns this year. If you don’t have a regular accountant or your go-to person isn’t up to speed on the cryptocurrency tax rules, Happy Tax offers all of the cryptocurrency tax advice and planning services that you need. Happy Tax employs the most skilled and experienced Certified Public Accountants (“CPA”) specifically focusing on the needs of cryptocurrency investors like you.
IRS Marks Another Victory in its Case Against Coinbase
In 2015, only about 800 people reported cryptocurrency income on their tax returns. The IRS found this to be very suspicious. Particularly because the country’s most active Bitcoin exchange, Coinbase, had about 500,000 active users at the time. In December 2016, the IRS demanded records on all of Coinbase’s users who were active between 2013 and 2015 seeking to sniff out likely tax evaders. Coinbase fought back, refusing to provide the information and deciding instead taking the issue to court.
The IRS v. Coinbase case was hard fought, and the exchange won a small victory by getting the request narrowed down substantially. But in late November of last year, a federal judge ordered the exchange to hand over information on approximately 13,000 user accounts. Pursuant to the order, the IRS was entitled to receive the name, birthday, address, and taxpayer ID of all these users’ accounts. These particular customers were selected as the highest-volume traders between 2013 and 2015, meaning that they were most likely the individuals who owed the most in back taxes.
Coinbase just announced that it has compiled all of the data required by the order and disclosure is imminent. According to an email that the exchange sent to many of its users, it plans to hand over the information to the IRS by mid-March. Most of the Coinbase account holders exposed to the IRS in the data dump can expect an audit just about any day now. But before you are lured into a false sense of security because you’re not one of them, remember that this is only the beginning.
The IRS has been around for over 150 years, and at this point, it has seen just about every trick in the book when it comes to people trying to avoid their taxes. It doesn’t take tax evasion lightly, and it knows that many people are still failing to properly report their cryptocurrency income properly. The IRS will continue to go after cryptocurrency traders who have not reported their trading income properly and, at the end of it all, most of them will be wishing they had just paid their taxes in the first place.
Cryptocurrency Tax Liability Can Be a Challenge
If the IRS v. Coinbase lawsuit has taught us anything, it’s that you can’t avoid paying taxes on your cryptocurrency income. And attempting to evade federal taxes is never a good idea since doing so can land you in real trouble. But between the complexity of capital gains taxes and a volatile investment environment, properly reporting your cryptocurrency investments on your tax returns is harder than it seems at first blush. As a result, cryptocurrency investors are starting to turn to professional tax preparers this year, many for the first time.
If you’re looking for a cryptocurrency accountant, look no further than Happy Tax! Happy Tax is an easy-to-use mobile app that connects you with a trained and licensed CPA who can help you with all of your tax needs this year and beyond. Happy Tax CPAs have the expertise you can rely on to keep your tax bills low, and they have been trained in the tax rules and regulations that specifically apply to Bitcoin and other virtual currencies. If you have virtual currency assets, you can count on Happy Tax to get you the tax planning and preparation services you need to keep the IRS off of your case.
Need Help With Your Cryptocurrency Taxes? Contact a Trained Professional
The cryptocurrency tax space is sparsely populated. Few of the major tax preparation services offer any assistance to virtual currency investors, and self-preparing your returns this year is all but impossible if you performed a lot of trades in 2017. Fortunately for the cryptocurrency community, help is available. Happy Tax is committed to providing cryptocurrency investors with the highest-quality tax advice and preparation services.
The tax professionals at Happy Tax customer are licensed Certified Public Accountants, not just bookkeepers or unlicensed tax preparers. As a result, Happy Tax customers can rely on the extensive qualification, competency, and ethical standards required for licensing in addition to the special cryptocurrency tax training Happy Tax professionals receive.
If you’re working on preparing your tax returns and are struggling with figuring out how to claim your cryptocurrency investments, contact a Happy Tax representative right away. They can help make sure you’re taxes are completed on time, in full, and at the lowest possible cost to you.