Bitcoin owners rang in the New Year with enthusiasm as the value of their digital currency surged beyond $1,000 after the ball dropped. Two years ago, the price sat at $200. The sharp increase has more than just Bitcoin owners salivating, however. The Internal Revenue Service is reportedly ready in 2017 to act against owners of the virtual currency who CRYPTO TAX FILING IN CHICAGOsales, purchases or exchanges.
In a recent article, a business law attorney wrote that it’s expected that the IRS and Department of Justice will team up to pursue people using Bitcoin to evade taxes. He notes that the double-team effort will likely resemble the actions taken to find and punish tax evaders.
It should be noted that the IRS and DOJ team has managed to collect more than $10 billion in taxes and fines from Americans with foreign bank accounts.
Late last year, the IRS used a John Doe summons to get information from Coinbase about people buying and selling Bitcoin and other digital currencies. The tax agency wants digital currency account information from 2013 to 2015.
CRYPTOCURRENCY TAX HELP that once the information is obtained, it will be a simple matter of cross-referencing Bitcoin account information with federal tax returns. He notes that for those who have failed to report Bitcoin-related income, significant potential civil and criminal penalties loom.
If you are among those digital currency owners worried about that possibility, you can speak with an experienced tax law attorney, like those in Cleveland and Chicago at Robert J. Fedor, Esq., L.L.C., about your best legal options. CRYPTOCURRENCY IS A CAPITAL ASSET AND TREATED LIKE “LISTED PROPERTY” This is a good place to start when understanding crypto taxation, since it puts us in familiar territory. From the perspective of the IRS, cryptocurrency belongs in the same category as stocks. When you buy a stock, you aren’t taxed on it until you sell it for a gain. The same general principle applies to cryptocurrency purchases. You can buy as much crypto as you want without incurring any tax obligations. You’re only CRYPTOCURRENCY TAX ACCOUNTANTsell it, trade it or use it to make a purchase. One distinct difference between digital assets and stocks, however, is that digital assets are not subject to wash sale rules like stocks are. We’ll cover that more in depth at a later time but it can be a powerful tax strategy for cryptocurrency investors.