What You Need To Know About Paying Taxes On Cryptocurrency

 

The IRS is always looking for ways to make sure Americans pay for their taxes. In the upcoming tax filing the IRS is expected to tax those who buy, own, exchange, receive it for free, or mining Cryptocurrency. You are now expected to declare it on your 2020 tax filing. According to an article by CNBC the first question the IRS will ask you in your tax returns or 1040 is, "If at any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?" There’s going to be two check mark boxes titled yes or no and I know what you might be thinking. What happens if you check the wrong box? Well, you have to be really careful since the IRS will hold you accountable for this and this can lead you to be charged with tax invasion. According to the new instruction draft 1040, if you trade between Cryptocurrency for example trading Ethereum for Bitcoin you have to write it down in your tax return. The IRS is also expecting Cryptocurrency holders to track their own transactions meaning if you bought, sold, or exchange goods for Cryptocurrency you are responsible for recording those transactions. If you use different platforms to keep your Cryptocurrency then make sure you are keeping up with all those transactions. According to the IRS, they consider Cryptocurrency as property, the same way stocks and other types of investments. So this means if you capture any capital gain from any Cryptocurrency then you are responsible to pay taxes on that gain just as a stock. I know you may be asking yourselves how the IRS is going to trace transactions on Cryptocurrency? Well According to an article in CNBC, the IRS has been cracking down on people that haven't paid any taxes on their capital gains. If you hold any Cryptocurrency for more than one year it would be considered a long-term capital gain which means you will pay lower taxes and if you hold it for less than a year it would be consider ordinary income which will be taxed at a higher rate. Just make sure to comply with the IRS and their new guidelines to avoid any trouble. Also talk to your CPA  about these new guidelines to make sure you are fully complying with the IRS.


Makesenseofyourfinances       Bruiz_          @brianruiz1523


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