With the income tax season coming to close, it’s crunch time to get everything that you need to get it in on time. Cryptocurrency is easy to forget in the chaos that ensues, but can have severe consequences if forgotten. Even worse is not knowing what you need for your crypto investments and what you can file or ignore. Have no fear. We’re here to help! Grab a pen and take some notes; this will help you get a jump on getting those forms in without having to file for an extension.
The standard for the IRS was released in 2014 and states that cryptocurrency is to be treated as property rather than currency. This can be confusing, but it’s in the same realm as real-estate, gold and stocks. There are some caveats, though, requiring all cryptocurrency made as income to be filed as such. Otherwise, your crypto will have to be reported as capital losses and gains. To figure out what constitutes these ups and downs this tax season, knowing what events are considered taxable is the next step.
While the cryptocurrency is viewed as property, there are still instances that are considered taxable events. Triggering a specific event causes a gain or a loss to be reported to your taxes. If you want to know more details, you can always check with the previously mentioned IRS policy for virtual currencies.
Here’s a quick breakdown:
Actually, yes, it does. The IRS has mainly released specifications for Bitcoin, the first and most encompassing cryptocurrency to date. You can check out here for a comprehensive breakdown of the IRS’s rules on Bitcoin, but I’ll cover the premise of those rules on it’s most basic level.
While it seems unfair that the IRS is singling out holders of this specific cryptocurrency, it makes sense. They’re attempting to catch up with the fluctuating and ever-evolving crypto market and will likely be updating the rule in the time to come. This could also be a great gauge on where cryptocurrency legislation is heading toward in the future, so even if you haven’t invested in Bitcoin, keeping an eye on the progress is important.
As far as knowing what you need to have with you, here’s a quick rundown for what forms you’ll need to file your crypto gains/losses when you complete your taxes. If you’d like a more in-depth look at it, check out my post here.
No one is a big fan of tax season and filing their taxes, but it must be done. If you know what to expect for the process, you’ll have a leg up on everyone else, and you’ll get it all filed quite a bit faster if you have everything that you’d need from the get-go. There’s still a little time left to get everything done! However, if you still don’t think that you can get it done by the 15th, remember to file for an extension to give yourself another few months.