Many people invest in cryptocurrencies such as Bitcoin, Bitcoin Cash, Litecoin, Ethereum, or Ripple. While you can buy, sell, and exchange these digital currencies just like money, the IRS does not tax cryptocurrency like it does cash or income. This does not mean that you don’t have to pay taxes on crypto-related gains, however, as the IRS does tax these gains like it would tax property. If you are a crypto investor, you should discuss tax law compliance with an experienced cryptocurrency attorney.
In order to comply with tax laws regarding cryptocurrency, owners must accurately track the difference in value acquisition and sale for tax purposes. If you hold a certain amount of cryptocurrency in a foreign account or on a foreign-based exchange, you might be required to disclose your ownership by filing a Foreign Bank Accounts Report (FBAR) with the IRS.
Some people may think that the IRS will not know that they own crypto and may try to ignore the matter altogether. However, the IRS is cracking down on cryptocurrency taxes and often discovers the identity of owners who participate in any crypto transactions. If you fail to disclose your cryptocurrency ownership, you can face civil penalties if you are audited. You can face exorbitant penalties and possible criminal charges if you fail to file a necessary FBAR. If you’re getting audited or facing a tax assessment and penalties, you should call a cryptocurrency attorney immediately.
Schedule an Appointment with Our Cryptocurrency Tax Lawyers
At Diosdi & Liu, LLP, we assist with tax planning, compliance, and tax defense for cryptocurrency owners. If you would like to discuss how we can assist you, please call us at 833.829.4376 or contact us online today.