In the ever-changing world of cryptocurrency, it is hard enough to keep up with all the different crypto coins (such as Bitcoin), wallets, and crypto exchanges, much less trying to figure out what your tax reporting responsibilities are.
Mildrid Esua CPA is experienced with cryptocurrency taxation. You can trust us with your tax filings because we’re well-versed in cryptocurrency tax rules and regulations. We know how to accurately prepare and file your tax returns in line with the most current laws governing cryptocurrency so you avoid penalties, keep more money in your pocket and don’t get into trouble with the IRS.
IRS and Cryptocurrency
Form 8949 Filing
The package takes care of reconciling and reporting the gains and losses of all the crypto transactions for the entire year including airdrops.
FBAR filing (Report of Foreign Bank and Financial Accounts) may be required if you acquired Bitcoin or other altcoins on a foreign exchange. Failure to disclose crypto holdings can result in penalties assessed up to $10,000 or greater.
Similar to FBAR reporting, you may need to file 8938 if you have crypto coins held on a foreign exchange. Penalties can reach up to $60,000 for failing to disclose.
These rules apply to all digital and cryptocurrencies including Bitcoin (BTC), Ethereum (ETH), Litecoin (TLC), Dash (DASH), Ripple (XRP), Bitcoin Cash (BCH), etc. You may also be required to file an FBAR and possibly IRS Form 8938 and report all of the digital and cryptocurrencies that you currently own. And, if you don’t report your virtual transactions properly, the IRS may go after you for penalties and interest and, in some cases you may even face criminal prosecution.
Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.