IRS Warns US Taxpayers To Report Cryptocurrency EarningsMarch 30, 2018 9:25 pm
The United States Internal Revenue Service warned citizens this week that they needed to disclose any profits made through trading on cryptocurrency, amid calls for increased regulation on the crypto-markets, according to Smartereum.com.
The IRS issued a publication which said that profits made on virtual currency such as bitcoin are reportable on their income tax returns and the consequences for not properly reporting their profits can include legal actions and penalties.
The deadline for this law to take effect is on April 27th as tax day is just weeks away.
The IRS said that existing general tax law applies to transactions using virtual currency and said that if those are not included in one’s returns: “Criminal charges could include tax evasion and filing a false tax return. Anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000.”
It’s unknown the exact number of Americans that are involved in trading virtual currencies, but many have been able to reap large profits.
Coinbase, a popular cryptocurrency exchange, estimated that they had nearly 11.7 million users in the U.S. which transacted on cryptocurrency during 2017.
Ryan Losi is the Executive Vice President of Virginia accounting firm PIASCIK said, “If you sold crypto-coins or used crypto to buy anything in 2017, you probably owe the IRS taxes.”
The IRS likely released the publication since many Americans were unsure about taxation on virtual currency, so the organization provided the official guidelines to display how virtual currencies are treated and how they are considered a property in the U.S.
Virtual currency according to the IRS is a digital representation of value that functions in a manner similar to traditional currency so there will be “a failure-to-pay penalty of 0.5 percent per month, starting after the month in which it was due.”
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