Does the IRS tax cryptocurrency? Yes, they DO. And if you trade in cryptocurrency, don’t lie to the IRS about it–or ignore their communication with you regarding such cryptocurrency issues.
That’s the latest word from a variety of sources including the Internal Revenue Service itself, which reminds traders, “Virtual currency transactions are taxable by law just like transactions in any other property. Taxpayers transacting in virtual currency may have to report those transactions on their tax returns.”
You read that correctly, consumers are being advised that when the IRS chooses to tax cryptocurrency, they do so with an eye on extra scrutiny on those perceived to be flaunting the rules.
What is the relationship between cryptocurrencies like Bitcoin and the IRS? I remember starting out as a freelance writer and not understanding how certain tax requirements applied to me–I missed out on thousands of dollars in business-related tax write-offs because I was ignorant of the rules.
The same kinds of problems are possible with cryptocurrency–if you don’t know how the IRS classifies assets like Bitcoin, Ethereum, or others, you could wind up with a tax liability or a set of assumptions about your investment that aren’t in line with reality. It’s best to know the rules before you need them.
What should you know about Bitcoin and the IRS? What follows is NOT to be construed as tax advice–this is information I have learned through my own personal research and I am passing along what I have found works for me personally–your mileage may vary.
To earn revenue from the growing cryptocurrency market, more policymakers have opted to boost taxes. They exploited legislation to drive their tax policies. Governments ‘ revenue agencies use various methods to collect taxes. Their tax collection system relies on their jurisdiction’s tax laws. The tax laws of one’s nation can boost an individual’s ability to reduce the amount of money they have to pay in taxes (depending on what the law says).
Gaining an in-depth understanding of both state laws and Federal laws helps to reduce the risks of making costly errors when reporting taxes. More states are creating laws that affect how taxation should be paid for cryptocurrencies. While this makes it harder to keep up with tax obligations, there are several benefits to keeping in the know of both Federal and State tax laws. Some states offer more favourable tax laws on cryptocurrencies, which may help one in creating strategies to legally lower their tax obligations. Read More
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