Whether they realize it or not, a lot of cryptocurrency investors are behind on their taxes. And since most of us aren’t waiting in line to pay more in taxes this year, the IRS has taken it upon itself to find and collect underreported income – including cryptocurrency gains that didn’t make it onto prior years’ tax returns.
The IRS Criminal Division recently assembled a team of 10 special investigators that will focus specifically on cryptocurrency to evade taxes and perpetrate other financial crimes.
The IRS is flexing its enforcement muscle because it has a lot of evidence that people are using cryptos to evade taxes. While some members of the crypto community are skeptical about whether a handful of special investigators can really make a dent in such a huge market, the IRS crypto tax team has a strategy. Specifically, they’re focusing on when and how crypto investors cash out their coins. By limiting their focus on just one type of transaction, auditors are more likely to be able to detect inaccuracies that indicate tax fraud.
Millions of Americans have joined the crypto craze over the past few years. However, the IRS receives very few reports of cryptocurrency income on people’s individual tax returns. In the short run, underreporting your crypto income may seem like an easy way to save a few bucks on your tax bill. But at the end of the day, hiding your income from the IRS isn’t a smart idea.
The IRS can audit your returns up to three years back under normal circumstances, and up to six years if they’ve discovered unreported income. And lest we forget, willful tax evasion is a financial crime that can land you in federal prison. No amount of money saved on your tax bill is worth time behind bars, so better to just bite the bullet and report your crypto income on your tax returns.
Despite everyone’s preference to the contrary, you just can’t avoid paying taxes on your cryptocurrency investments. Fortunately, however, there’s help.
CryptoTaxPrep.com by Happy Tax offers tax advice and planning services that can minimize your tax liability and make sure your crypto income is properly reported. The crypto-trained tax professionals at Happy Tax are not only highly skilled, they are also licensed certified public accountants that are held to the highest professional standards. Happy Tax works with CPAs that specifically focus on the needs of cryptocurrency investors, so contact us today if you’ve bought or sold cryptocurrencies and want to make sure your financial activity is properly reported.