But wait, there's more fun,
The IRS has a new tax form out and wants to know about your cryptocurrency
Whether you're holding Ethereum, bitcoin or Litecoin, the IRS wants you to spill the details. A new form for the 2019 tax season asks whether you've acquired, exchanged or sold a financial interest in virtual currency.
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“If you’re a trader of bitcoin or other cryptocurrency, you’ll want to invest in some accounting software specific to crypto that will allow you to track transactions,” Levine said.
“Otherwise finding out your basis is going to be a disaster,” he said.
If you sold your cryptocurrency, you need to report the transaction. If you wound up with a capital gain, you must pay the appropriate tax.
Cryptocurrency you receive from an employer is subject to federal income tax withholding, FICA tax and federal unemployment taxes, just like wages. These should be reported on your Form W-2,
the IRS said.
Meanwhile, independent contractors who are paid in virtual currency must pay self-employment taxes.
For those who mine cryptocurrency, the fair market value of it as of the day of receipt is included in your gross income, according to IRS guidance.
Failure to properly report these transactions can be costly: You may be audited and held liable for penalties and interest.
In the most extreme cases, you could face prison time and a
fine of up to $250,000.
“A taxpayer who is investing in virtual currency should have a system for tracking the purchase and selling price of the assets,” said April Walker, lead manager for tax practice and ethics at the American Institute of CPAs.
“For tax purposes, the virtual currency is treated as property, similar to a security,” she said. “Therefore, taxpayers should maintain cost records similar to the way records are kept for stocks and securities, although there will be no monthly statements.”
