Many people have been enthralled with cryptocurrency in recent years and the amazing returns that it is sometimes able to provide. However, you should know that your gains in cryptocurrency are taxed, just as your gains in any other asset that you might invest in are. Cryptocurrency gains are taxed, but you need to know more than that. We’re going to give you the information that you need to ensure you report your cryptocurrency taxes correctly and that you don’t get into trouble for reporting them incorrectly.
Paying Cryptocurrency Taxes Correctly
The most important thing that you need to know when it comes to cryptocurrency and taxes is that since the year 2014, the IRS has considered cryptocurrency to be property. This means that you must report cryptocurrency assets and transactions involving cryptocurrency assets on your tax return as property. This will require that you calculate the value of the cryptocurrency that you hold at the time of the transaction to determine how much you will owe.
Consequences of Not Paying Taxes Correctly
Anyone that has tangled with the IRS on any occasion knows that it’s never fun and rarely turns out in your favor. The IRS will pursue you if they believe that you have not reported your taxes correctly. To avoid this, you should make every effort to report your taxes accurately when it comes to cryptocurrency gains and transactions.
If you fail to pay cryptocurrency taxes correctly, there are several potential consequences. The IRS would audit you to find more information about your income with cryptocurrency and they could go so far as to garnish your wages to reclaim the taxes they are owed or repossess your assets.