This means that a virtual currency will assess capital gains when it’s sold at a profit.įor instance, if you bought your Bitcoin and then exchanged or sold it, you have to pay taxes for that gain. Generally, the IRS treats cryptocurrency as “property”, similar to stocks, gold, or other investments. The first, most popular, and widely used cryptocurrency is Bitcoin. It can be used to buy goods and services, transferred, traded, saved for future use, be given as a gift, or held for investment. What Is Cryptocurrency?Ĭryptocurrency, also known as virtual currency, is digital and decentralized money based on blockchain technology. This article will guide you to better understand how cryptocurrency is taxed and if you have to pay taxes on cryptocurrency. Not doing so could lead to future tax problems, especially if you have unreported profits on Bitcoin, Ethereum, or other cryptos. There’s a cryptocurrency tax, so if you’ve been lenient on your crypto taxes, it’s the right time to clean up your act. It can also be difficult for digital currency traders to keep track of what’s owed on their gains. The IRS launched its Operation Hidden Treasure to look at blockchains for unreported crypto income.Īs such, people who trade digital currencies but failed to report their use or trading of virtual currency or have been ignoring their tax obligations may find themselves the target of the IRS.Įxperts in the industry share that this could create some unwelcome tax bills especially for those who conduct multiple transactions each year.
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With the increasing acceptance of cryptocurrencies as forms of payment, the Internal Revenue Service (IRS) sharpens its focus on crypto transactions.
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As of August 2021, there are more than 6,000 types of virtual currency – a huge increase since 2013. With cryptocurrencies skyrocketing in recent years, the IRS is coming for crypto users and investors who haven’t paid their taxes.Ĭryptocurrency has become mainstream and gained popularity over the years.