"Crypto and Taxes"
Updated: Feb 8, 2022
Crypto and taxes - yes, crypto and taxes; isn’t that crazy? To me, it is considering that the US Government has said numerous times that this digital currency is for criminal activity, along with many other allegations. Nonetheless, disregarding these comments, The Internal Revenue Service (IRS) is demanding US citizens to pay taxes for the earnings on crypto. Yes, they want your money, even though, according to them, it comes from criminal activity; very contradicting if you ask me.
There has been a lot of speculation concerning the tax filing for 2017 due to Bitcoin. This has a lot to do with the fact that 2017 was a very wealthy year for Bitcoin investors. According to CNBC.com and their interview with Ryan Losi, a certified public accountant and executive vice president of Virginia accounting firm PIASCIK, “If you sold crypto-coins or used crypto to buy anything in 2017, you probably ow the IRS taxes... For Americans, there is no free lunch." Losi also says. "If you're richer tomorrow than you were today, it is likely you have some tax burden associated with that." He also states that not paying up can have consequences, “If the IRS discovers you under-reported your income when you filed your taxes in April, there is a failure-to-pay penalty of 0.5 percent per month, starting after the month in which it was due."
The taxes recollected by the IRS are for government use, but why did they suddenly decide to do something with the crypto earnings? Investopedia.com assures, “Bitcoin is now listed on exchanges and has been paired with leading world currencies, such as the US dollar and the euro. The US Federal Reserve acknowledged the growing importance of Bitcoin by announcing that Bitcoin-related transactions and investments cannot be deemed illegal. At the start, Bitcoin's attractiveness was attributed partly to the fact that it wasn't regulated and it could be used in transactions to avoid tax obligations."
In 2014, the IRS put together a very short Tax Notice for those who are in the crypto world. This document can be downloaded directly at the IRS website. According to this document, virtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency, is referred to as convertible virtual currency. The sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability. “It was decided to treat crypto as property (a capital asset like stocks, bonds, and other investment properties). It is not treated as currency like the U.S. dollar. That means it is treated as real estate or gold in most cases, thus, it is subjected to the short and long-term capital gains tax in most cases when held for investment. If it's used for transactions, as an individual or business, then other rules can apply," it is explained at Cryptocurrencyfacts.com
Despite the tax notice given by the IRS in 2014, CNBC assures that these taxes haven’t been paid by the entire universe of crypto users. Due to the latter, in 2016 the IRS summoned records from the exchange Coinbase; the court ruled in favor of the IRS, giving them the information of 14,000 users who are under the IRS watch now. They are not playing around...
I have a few friends in New York, and taxes are a nightmare; there is no getting out of it. The IRS is no joke and it doesn’t have many fans. So, if you’re a crypto user and living in the US, you might want to be informed of dates. Also, you might want to keep track of your virtual currency movements; you might need it for tax purposes.
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