Be sure to report cryptocurrency activity on your tax return
Saturday, January 29, 2022
Cryptocurrency's popularity skyrocketed during the height of the COVID pandemic. Celebrities endorsed it. Athletes and government officials embraced it. So, of course, more of the less famous added the virtual money to their portfolios.
Then 2022 arrived.
The value of most cryptocurrencies has plummeted in recent weeks, wiping out billions of dollars of wealth.
But the bad news doesn't stop there. Now it's tax time.
IRS' increasing interest in crypto: The digital money's growing acceptance naturally attracted the tax man's attention.
The Internal Revenue Service says that for tax purposes, crypto is treated property. As such, the general U.S. tax principles applicable to property transactions apply to transactions using virtual currency.
That means profitable sales of virtual currency are taxed at capital gains rates. And losses are subject to any limitations on the deductibility of capital losses.
The IRS interest in cyber money is wide ranging. The agency's Criminal Investigation unit has targeted crypto's questionable uses.
For the law-abiding, the IRS also is keeping an eye on more mundane virtual currency moves.
Reporting your crypto activity: It starts with a question near the top of Form 1040. Just below where you enter your name, address, and other personal information on your tax return, the IRS asks your crypto activities for the tax year.
You must answer with the correct yes or no checkbox whether, "At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?" The checkbox yes or no
"That's where the hammer comes down because they can say that you lied on a government document under penalties of perjury," Ryan Losi, a Richmond, Virginia-based CPA and executive vice president of accounting firm PIASCIK, told CNBC.
The article with Losi's quote is one of this weekend's Saturday Shout Out items on cryptocurrency and taxes.
- 'You're playing with fire if you don't report it.' What happens if you don’t disclose crypto activity this tax season by Kate Dore for CNBC
- Traded Cryptocurrency in 2021? Here's How to Approach Taxes by Sabrina Parys for NerdWallet
- Frequently Asked Questions on Virtual Currency Transactions from IRS.gov
If you are a cryptocurrency aficionado, good luck with your holdings. January has been a bear, but there are 11 months left.
Also, good luck with your taxes. Be sure you don't antagonize Uncle Sam's grizzly. You can do that by following the advice in today's Saturday Shout Out features, starting with letting the IRS know of your crypto transactions.
You also might find these items of interest:
- A look at digital asset info reporting in the infrastructure law
- What cryptocurrency's booming values mean to owners' taxes
- IRS clarifies when a cryptocurrency transaction isn't a tax transaction
Your tax liability for certain cryptocurrency transactions (listed and explained in section 3) will be based on one of the seven tax rates that apply to you based on your adjusted gross income and filing status. To learn more about Dex trade history, read this blog https://www.dexfolio.org/blog-posts/multi-dex-portfolio-trackers
Posted by: Jerry Tucker | Sunday, February 27, 2022 at 04:33 AM