After years of avoiding taxation, the IRS is now regulating Bitcoin, Ether, Dash, and other types of cryptocurrency. If you’re an investor involved in trading, bartering, or exchanging cryptocurrency for services, the IRS is watching and they want their share. But the rules governing cryptocurrency are debatable and unclear, even for many seasoned tax professionals. At Chemrick Tax Resolution LLC, we possess the special knowledge and expertise to help investors resolve IRS tax problems related to cryptocurrency. We can assist with amending past tax returns, filing back tax returns, making voluntary disclosures, and more.
The federal government sees cryptocurrency as property rather than currency and applies the same principles for tax reporting including capital gains and losses. So, if for example you buy a Bitcoin at one price and sell it later in the year for a profit, then your gain is subject to tax under current IRS regulations just like it would be for property.
The biggest difficulty for traders and investors is keeping accurate records. If you don't report your virtual transactions properly the IRS will go after you for penalties and interest and you can even face criminal prosecution. But reporting your income on these transactions is tricky. You must maintain records that include the U.S. dollar value of the purchase at the time of each transaction. If your recordkeeping does not already include this information, careful research is required in order to calculate tax correctly.
Just as with other types of income, taxpayers may also be required to file FBAR if their foreign crypto accounts exceed $10,000 at any time during the year. The IRS is watching and has methods for discovering these types of transactions. So if your circumstances require you to pay taxes on your foreign investments, compliance is essential.
Reporting digital currency on your tax returns is not a simple but Chemrick Tax Resolution LLC will guide you through the process and get you up to date on your crypto tax filings. Call us now at 203-956-6222 to learn more request your free consultation through our website.