From the Tax Legislation Workplaces of David W. Klasing

Note: Cryptocurrency trades are currently taxable in the calendar year they occur even if no fiat changed hands. I.E., trade of 5 Bitcoin purchased for $20 (in total) for 3 Ethereum valued at $40 (in total) results in a $20 capital gain. If held for less than a year this is ordinary income, held over a year, long term capital gain.

Working with the Fraud Enforcement Office, IRS Criminal Investigations will aim at getting ahead of those taxpayers who have engaged in tactics to avoid reporting income earned from the trading of virtual cryptocurrency. A representative from the IRS announced that specially trained agents will look for “badges of fraud” as a part of Operation Hidden Treasure.

The IRS indicated that they would be looking at common tax evasion techniques such as structured cash transactions (dealing in amounts of cash less than $10,000 to avoid reporting requirements) and the use of nominee or shell entities to avoid reporting on an individual basis. The first page of the Form 1040 for 2020 specifically asks taxpayers to indicate whether they had received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency.

When a taxpayer purchases virtual currency, they take a cost basis in the asset. When the asset is sold or otherwise disposed of, any amount received more than their basis (what was paid to acquire the crypto) is treated as capital gain. Nonetheless, there have been various questions about how the intricacies of virtual currencies should be treated for tax purposes, such as hard forks.

If you have earned large unreported profits from the trading or sale of virtual currency and have not reported it on your tax returns, you should consult with the dually licensed Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing to determine the best way to come into compliance before being criminally prosecuted.

See the full version of this article here.

Public Contact:
Dave Klasing Esq. M.S.-Tax CPA, 
(email protected)

SOURCE Tax Law Offices of David W. Klasing, PC

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