Taxpayers to report crypto earnings on their Income Tax Returns
Do you want to hide your crypto income? If yes, then you are doing mistake. You must read the memo released by the US Internal Revenue Service on 23rd March, in which they have clearly mentioned that the crypto investors must declare their crypto income on their income tax returns.
According to the IRS, virtual currencies are considered as property, and so taxpayers have to pay federal property taxes if any of them are earning from crypto trading. In case you do not mention or try to hide your crypto income, you can be held for penalties and interest, not only that, it can also be held as criminal prosecution.
According to IRS, cryptocurrencies are not tangible and their transactions are anonymous, thus crypto investors may try to hide their crypto earnings. As per Credit Karma Report, only .04 percent of crypto investors mentioned their crypto earnings on their tax returns in 2017.
Therefore, IRS released the memo to remind taxpayers about crypto income so that they couldn’t try to hide it from the US Government.
Source: https://cointelegraph.com/news/irs-warns-taxpayers-to-include-crypto-on-income-tax-returns
The thing with crypto, you can lose those 'earnings' a few weeks later. I had £600 in BTC, a month later that was £300. How could you report that to IRS in any meaningful way?
What I understood that you would be liable to pay tax only if you convert it to fiat currency. Before that it will be considered as invested amount.