"Crypto and Taxes"
Updated: Apr 20, 2018
Crypto and taxes - yes crypto and taxes, isn’t that crazy. To me it is considering that the US Government has said in numerous times that this digital currency is for criminal activity and many other allegations but aside from 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 regarding the tax filing for 2017 regarding Bitcoin and it has a lot to do with the fact that 2017 was a very wealthy year for Bitcoin investors. According to www.cnbc.com and there interview to Ryan Losi, certified public accountant and executive vice president of Virgina accounting firm PIASCIK, “If you sold crypto-coins or used crypto to buy anything in 2017, you probably… For Americans there is no free lunch," Losi 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? www.investopedia.com assures that, “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 when it announced 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 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 https://www.irs.gov/, 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 economic 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 like real estate or gold in most cases, and thus it is subject to the short and long-term capital gains tax in most cases when held for investment (if used for transactions, as an individual or business, then other rules can apply”, explains https://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 and because of this in 2016 the IRS summoned records from the exchange Coinbase and 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 and 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 on dates and yes you might want to keep track of your virtual currency movements. You might need it for tax purposes.
Hope you enjoyed it, feel free to comment.