IRS Reminds US Taxpayers to Report Crypto Earnings
IRS Reminds US Taxpayers to Report Crypto Earnings
The Internal Revenue Service has reminded U.S. taxpayers to include any cryptocurrency income on their annual tax forms.
In a release published Friday, the IRS noted that cryptocurrency transactions are taxable like other forms of property, echoing a release issued in 2014 outlining how cryptocurrencies would be taxed.
At the time, the IRS said profits and losses on digital currency would be treated as capital gains when the currency is being used as a capital asset. Similarly, wages paid to employees in crypto are taxable, while crypto payments made to independent contractors and service providers are reported through Form 1099.
In Friday's release, the IRS expanded on its position, stating that payments made in cryptocurrencies must be reported to the agency.
"A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property," the agency said.
Notably, the release once again explains that the IRS classifies cryptocurrencies as property. It continued:
"Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest."
These penalties can include criminal prosecution "in more extreme situations," according to the warning. Tax evasion is listed as one possible criminal charge, and if convicted, a user could be jailed for up to five years and face a $250,000 fine.
Similarly, any users who file a false tax return could serve up to three years in jail and pay an identical $250,000 fine.
The tax agency also noted that "some taxpayers may be tempted to hide taxable income from the IRS."
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I'm glad they sent a reminder.
Now if they could just agree on their rules, regulations AND provided clear instructions to comply --- that would be greaaaaaaaaaaaat!
I'm sure many more people would be happy to comply and report said transactions if there was an automated way put into place that accurately did it for them. If the regular individual can't accurately keep track of daily transactions, which average daily price of what coin was actually the one the IRS will go off that day (there are many exchanges with different rates), how can the IRS say it isn't accurate?
If they can say that a person's personal reporting of said transactions is or isn't accurate, how did they arrive at that conclusion? And if they could arrive at that conclusion AND are willing to show it to the person to PROVE THEIR WORK (like in math class), then why didn't they share that methodology with the general public well in advance of tax time?