fbpx

A Word of Caution to Cryptocurrency Investors

Share on facebook
Share on google
Share on twitter
Share on linkedin
If you’re a bitcoin investor, the IRS expects to receive its fair share.

kamil-pietrzak-603302-unsplash(Originally posted 01/23/2018)

If you invest in bitcoin or other cryptocurrency vehicles in the United States, you should know that in 2014 the IRS ruled that, for tax purposes, these investments need to be treated as property, not currency.

That means, if you’re a bitcoin investor and have cashed in your gains or made purchases using cryptocurrency, the IRS expects to receive its fair share.

In many cases. since your cryptocurrency exchange did not issue a Form 1099, you may have previously overlooked declaring your transactions on your tax returns.

In fact, for the years, 2013-2015 fewer than 1,000 taxpayers a year claimed bitcoin gains. During those years, cryptocurrency value soared from the $13 range to about $430. With bitcoin opening today at $10,772.15, cryptocurrency now has the full attention of the IRS.

The IRS won a court ruling on November 29th, 2017, when a U.S. District Court judge in California ordered Coinbase, a popular platform for buying and selling bitcoin and other cryptocurrencies, to turn over identifying information on accounts worth at least $20,000 from the 2013 to 2015 period.

(As of this writing, it’s unclear whether the exchange will comply or contest the ruling.)

Bottom line, although many investors may have assumed bitcoin investments were anonymous transactions, that information is available. And the IRS has already gone to court to obtain it.

Not reporting your gains can be viewed as tax evasion by the government.

So how do you determine what you owe?

You need to track the cost basis of each transaction, your holding period, and the sale price.

If you held your cryptocurrency for one year or less and made money on it, it’s considered a short-term capital gain and taxed as ordinary income. Depending on your tax bracket for 2017, that could range from a tax rate of 10 percent to 39.6 percent.

Any bitcoin you sold or spent after owning it for more than one year is taxed as a long-term capital gain. Taxable rates on those gains range from 0 percent to 20 percent, with higher-income households paying the highest rate.

NOTE: The accountants at Brown Brown & Associates are very familiar with bitcoin investing and its tax ramifications.

Not Going to College Isn’t a Good Excuse for Not Succeeding

Some of the best known and most successful entrepreneurs had little or no time in a college classroom.

Read More

IRS Releases 2018 “Dirty Dozen” Tax Scams

The scams range from the obvious—like refund inflation—to the more covert—like offshore tax avoidance.

Read More

Prepare Now for Natural Disasters

Disaster proofing your personal and business financial and tax records is as important as stocking up on batteries and bottled water.

Read More

The Downside of Generosity

If you want to send up a red flag to the IRS, just give someone money out of the goodness of your heart with no strings attached.

Read More

Why We Expect More Businesses to File Extensions This Year

Owners of small to medium-sized businesses may want to take a little more time this year to make sure they take advantage of all the opportunities available to minimize their tax bill.

Read More
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn

Leave a Comment

About Us

Since 1981, we bring measurable results to business owners who want to preserve wealth, boost operating capital, minimize their tax burden, and soar in today’s challenging business environment.

Recent Posts

Sign up for our Newsletter

Scroll to Top
%d bloggers like this: