Times have changed, and where they might not have been as vigilant before, the IRS and federal government are no longer playing around when it comes to taxing your cryptocurrency gains.
Just last month, they issued a statement reiterating what they had said back in 2014, reminding investors that crypto is considered a property and therefore any sale of virtual currency is required by law to be logged as a capital gain or loss. This makes it taxable.
Whereas they might have previously been more lenient, they are really cracking down now. In November last year, the IRS announced that it had actually won a court case against Coinbase, which is one of the biggest cryptocurrency exchanges there is, showing just how serious they are.
As well as them cracking down, the Tax Cuts and Jobs Act, which was signed into law last December, officially closed the tax loophole, which previously allowed investors of cryptocurrencies to sidestep taxation.
So, just what will happen if you do not report your gains? If you purposefully avoid reporting any gains and losses, you can expect to face a number of different penalties, which can include criminal prosecution, although this is in extreme cases. Tax evaders, and those who knowingly file a false tax return can face prison, along with a hefty old fine.
The March press release confirmed this, saying;
“Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest.”
Keeping track is not always easy; however, you are still expected to fully comply with IRS guidelines, unless of course you want to face a hefty fine and a possible prison sentence.
Featured Image Original Source: Flickr – Great Photo By Sam Howzit