What Do Cryptocurrency Investors Need to Report on Their Federal Tax Returns?
As 2020’s revised Tax Day inches closer, many individuals and businesses are beginning the process of gathering the information needed in order to prepare their returns. For many, this includes information about their cryptocurrency investments. After issuing updated guidance (and warning letters) last year, the Internal Revenue Service (IRS) is preparing to hold taxpayers accountable if they fail to properly report cryptocurrency transactions on their July 15, 2020 returns. Washington, D.C. tax attorney Kevin E. Thorn is available to answer any questions you may have about the need to report your cryptocurrency investments. Please note that the Internal Revenue Service is actively conducting audits and sending IRS cryptocurrency audit letters in this area.
Understanding the Federal Reporting and Tax Payment Obligations Related to Cryptocurrency
For federal income tax purposes, cryptocurrency holdings are considered “property” just like other tangible and intangible investments. Among other things, this means that gain and loss from cryptocurrency transactions need to be reported, and individual and corporate taxpayers must pay appropriate tax based on their respective tax brackets and whether their cryptocurrency transactions generate ordinary income or capital gains (or losses).
Failure to report taxable income and pay taxes due as a result of cryptocurrency transactions is treated similarly to other forms of federal income tax evasion, and taxpayers that omit information from their returns – whether intentionally or unintentionally – can face significant liability. If there is evidence to suggest that information about cryptocurrency transactions has intentionally been omitted from a taxpayer’s return, criminal penalties could be on the table as well.
Reporting Cryptocurrency Investments and Transactions to the IRS
How do you meet your reporting obligations and pay what you owe? For many taxpayers, this will be easier said than done. Depending on the type(s) of cryptocurrency owned and the exchange(s) utilized to conduct transactions, it can be exceedingly difficult – if not impossible – to retroactively create a historical record of taxable events. Yet, this is what is required, and taxpayers that do not have the records needed in order to meet their federal obligations will need to seek advice from an experienced Washington D.C. tax attorney prior to submitting their returns to the IRS. Learn more: Cryptocurrency Taxes: The Ultimate Guide to Tax Consequences.
Discuss Your Federal Tax Obligations with Washington D.C. Tax Attorney Kevin E. Thorn
If you have questions about your cryptocurrency-related federal income tax obligations, we encourage you to contact us for more information. To request a confidential consultation with Washington, D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, email firstname.lastname@example.org, call 202-349-4033 or contact us confidentially online now.