10 Mar Time to Come Clean About Your Cryptocurrency Holdings
After years of flying under the radar, taxpayers who hold Bitcoin, Ethereum, Litecoin, and other cryptocurrencies are finally getting scrutinized by the IRS its time to come clean about taxes on cryptocurrency. The IRS has determined that cryptocurrency is here to stay and that the outrageous refunds that early adopters have enjoyed could be a massive windfall for government coffers.
The tax agency has also figured out that many earliest adopters to late comers who are holders of crypto could owe a lot of money on these assets. The currency may be virtual, but to the IRS, the taxes that are due are all too real.
Note – if you think you might owe back taxes on your crypto, we encourage all readers to contact us at http://bit.ly/2Hh7cEl. Contact us today for a free, no-obligation, confidential consultation.
The Illusion of Anonymity
If you have been skating along under the veil of anonymity and failing to report your cryptocurrency holdings, you might want to rethink your strategy. After years of taking a mostly hands-off approach, the IRS is catching up in a big way. The agency is pulling out all the stops to recover the money the government believes is owed to them.
Many holders of cryptocurrency are under the mistaken impression that their transactions are totally anonymous, and that there is no way for the IRS, or anyone else, to tell how much they hold or how they use their virtual coins. That may be a soothing fiction, but the reality is far different.
The truth is that the IRS has a wide range of options at its disposal. From official form filings to subpoenas and legal documents, to pierce the veil of anonymity and find the real-world identities of cryptocurrency holders.
Did You Get a 1099-K? Well, So Did the IRS
In some cases, holders of cryptocurrency are finding tax forms in their mailboxes. If you receive this form, you can be sure the IRS received a copy as well.
When you file your taxes, an automatic matching program will compare the amount you claimed with the amount on these automatically generated forms. If there is a mismatch, you will hear from the IRS.
One of the most common forms used to report cryptocurrency holdings and transactions is the 1099-K. For sellers on eBay and some freelancers, this form will already be familiar. Still, it is being extended into the virtual world as well. If you receive a 1099-K form this year, it is time to come clean with your cryptocurrency holdings.
The Cryptocurrency Question and Your Tax Form
Until now, cryptocurrency holders could and often did, plead ignorance. They could claim they did not realize their Bitcoin, Ethereum, and other virtual holdings were taxable. They could back up that assertion by saying the IRS never asked them about these assets. Time to come clean about taxes on cryptocurrency.
The validity of that excuse may have been questionable. Now that thin veil of supposed ignorance will be gone. Beginning with the 2019 tax return, taxpayers will be asked directly on their 1040 if they bought, sold, transacted, or otherwise acquired any cryptocurrency. They will be expected to answer that question truthfully.
The wording of this question means anyone who holds any cryptocurrency would be required to answer in the affirmative. Even so, merely holding virtual coins in a cryptocurrency wallet does not necessarily imply any taxes will be due. Someone who holds cryptocurrency but makes no transactions should not owe any taxes just as a holder of stock does not owe taxes until they sell the shares.
Come clean about taxes on cryptocurrency as the IRS is getting serious about cryptocurrency, drawn by a combination of past returns, unreported taxes, and increased exposure of these alternative forms of payment.
SFS Tax Problem Solutions specializes in tax resolution. Our Certified Tax Resolution Specialist and Advanced Tax Crypto Expert, Jeffrey Schneider, EA, can answer any crypto tax questions you may have. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm. We’ll schedule a no-obligation confidential consultation to explain your options http://bit.ly/2Hh7cEl.