Crypto Currency Tax Rules
Crypto Currency Tax Rules
Virtual currency, also known as digital or cryptocurrency, has become a popular mainstream way of investing and a payment method. Popular cryptocurrencies such as Bitcoin, Ethereum, and many other cryptocurrencies continue to be subject to federal tax reporting requirements. The IRS treats cryptocurrency as property for federal tax purposes.
Buying, Selling, and Using Cryptocurrencies
When you sell, exchange, or use cryptocurrency to purchase a good or service, you recognize a capital gain or loss. Because Crypto is treated as property. Form 1099-DA is issued annually with the sale of digital assets. Taxpayers should maintain adequate records of the following to ensure accurate reporting on Form 8949:
- Purchase dates
- Purchase prices
- Sale or exchange dates
- Fair market value at the time of disposition
- Transaction fees
The IRS continues to expand digital asset reporting requirements, and failure to comply with IRS requirements can result in penalties, additional tax, and interest.
The above information is of a general nature only and should not be relied upon for specific situations. Click here for additional tax services information.
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