The Myth of Cryptocurrency Tax
The end of 2017 saw the rise of cryptocurrency in a major fashion. At one point, the most expensive currency (bitcoin) was being traded for slightly above $19,000 per coin. Recently, because the price has dropped and become much more steady, many investors still hold some type of coin to their name. Many have asked the question, how are these taxed, if they are? The answer is simple, yes the IRS expects people to report income from profit on cryptocurrencies, here’s how.
The IRS is currently treating cryptocurrencies like property, so the same taxable rates may apply to them. If held for over a year, they may qualify for the lower capital gains rate, if traded more regularly, the realized profit will be ordinary income. Furthermore, the use of cryptocurrencies to pay for services is also taxable, as are payments made to employees from employers with cryptocurrencies. Those who pay in cryptocurrency must typically issue Form 1099-MISC from the IRS to record the transactions and activity.
With the rise of and seemingly growing community that use cryptocurrencies, it is important to know all the tax consequences and rates that are associated with them. Remember that taxpayers failing to report could be audited and be held accountable for penalties and interest. It’s best to report anything you think may be taxable, and if you have any questions, ask the professionals at the Center for Financial, Legal & Tax, Inc.