The IRS is missing millions of dollars in tax revenues from the profitable cryptocurrency markets, and it’s taking action to make sure the hemorrhaging stops. Earlier this week, the IRS issued a press release reminding everyone in the cryptocurrency community needs to pay their crypto income taxes.
The IRS explained in its recent notice that virtual currency transactions are taxable, and anyone who does not properly report their cryptocurrency income could be audited.
If an audit uncovers intentional tax evasion or filing of false returns, you could be subject to criminal charges. Prison time for tax evasion or falsification is a real threat, so don’t risk your freedom just to save a few bucks. Instead, work with a professional tax preparer this year to make sure your returns are accurate and compliant with state and federal tax laws. The cryptocurrency-trained CPAs at Happy Tax have all of the knowledge and skills you need to make sure your cryptocurrency income is properly reported to the IRS this year.
The IRS included some helpful cryptocurrency tax information in its most recent release. Specifically, the tax agency highlighted the fact that some taxpayers are tempted to hide their crypto income from the IRS. Many rely on the pseudo-anonymous nature of cryptocurrency transactions to do so, believing that virtual currency trades and purchases can never be traced back to them. However, the IRS has retained a team of special investigators specifically focused on detecting and prosecuting cryptocurrency-related financial crimes. Law enforcement agencies have been successful in the past in their attempts to connect an individual’s’ public wallet key with their identities. As a result, people who believe that the IRS will never be able to track their virtual currency activity are living under a false sense of security.
The IRS also clarified that wages and payments to independent contractors using virtual currency are taxable and subject to withholding requirements. Additionally, the IRS clarified that any payments made using cryptocurrencies must be disclosed just like any other payment accepted in the form of valuable property. All in all, the IRS reminded American cryptocurrency investors that they must report their cryptocurrency transactions, no matter what form they take. Whether cryptocurrency is dispensed of through sale, trade, or used for retail payments, once a coin leaves your wallet you need to start thinking about your capital gains or losses.
The far-reaching cryptocurrency tax policy described by the recent IRS statement can seem overwhelming, but the tax professionals at Happy Tax are here to help. Through our newest division, CryptoTaxPrep.Com, every cryptocurrency investor can access the tax assistance they need to make sure they stay on the right side of the IRS.