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Cryptocurrency and taxes should be understood when filing

On Behalf of | Mar 18, 2021 | Tax Liens |

Bitcoin and other forms of cryptocurrency are growing in popularity in Maryland, Washington D.C. and across the world. People who are using this new form of currency may be excited about being involved in a potential game-changer that will be prominent in the future. However, as with most drastic changes, there are aspects that can sow confusion. Taxes are an ever-present issue that must be addressed. The Internal Revenue Service is aggressive in its collection practices if it believes there is wrongdoing taking place. Even amid the pandemic, people should be cognizant of how crypto should be reported and have legal protection if problems arise.

Key points about reporting crypto to the IRS

The IRS is warning taxpayers who own crypto that it must be reported on their tax returns. If there was income from this currency regardless of how it was accrued, hiding the information from the IRS could be a troublesome issue. If, for example, payments were made in crypto and it is later discovered through an audit even years later, the IRS will want to know why it was not reported. Crypto is a high-priority for the IRS due to its growing popularity. It asks on the tax return if the person was involved with crypto in any way and, if so, it must be reported.

The price of crypto fluctuates with investors and businesses still navigating this unfamiliar terrain. People are gaining and losing money quickly as its value spikes and recedes. For those who owned it but did not do anything with it, there will be no tax issues. Still, it is vital to inform the IRS that it was owned. The IRS has taken to letting people who own crypto and did not report income from it that they must pay. Currently, the IRS is allowing people some wiggle room to address any failure to pay, but that is not expected to last forever, especially with the growing use of crypto.

Legal assistance may be imperative with cryptocurrency

For all its benefits and the enthusiasm surrounding it, crypto is relatively new and can be confusing even to experienced business people and investors. The reality with income and investments that increase in value is that the IRS will want its share. Crypto is property and will be taxed as such. For those who are concerned about how crypto will impact their tax obligations or believe they are already in jeopardy because of failing to report it, it is wise to have experienced legal assistance. Consulting with legal professionals who understand aggressive tax collection might be able to help.