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Remember in 2017 when Bitcoin had a massive price increase and cryptocurrency gained popularity? Well, many people still buy and sell cryptocurrency, and the IRS is hunting them down.
Cryptocurrency is a relatively new currency, so there is little guidance on how to handle this income. If you own cryptocurrency and have not sold or traded any, you shouldn't worry just yet. However, the IRS still expects for cryptocurrency owners to report profits and losses. Any profits made on cryptocurrency are subject to a capital gains tax, and that percentage can reach to 37 percent of the profits.
As of now, the IRS is sending out notice letters to 10,000 cryptocurrency owners to remind them they may not have reported all of their income. Forbes and The Tax Adviser are all warning cryptocurrency owners about the seriousness of the letters the IRS has sent them. While an article from CBS News explains that you still have time to file an amended return, more serious IRS actions could appear in the future.
It is best to go ahead and handle your cryptocurrency taxes as soon as possible. Since cryptocurrency is so new, the IRS understands the confusion when reporting this income. If you failed to report any cryptocurrency income, you could be in more trouble so you should be filing your amended return immediately.
For some guidance on how to pay taxes on your cryptocurrency, here are a few tips from CNN Money's article, 4 Things to Know About Your Cryptocurrency at Tax Time:
When cryptocurrency was new and exciting for many people, they probably didn't expect the tax implications to be so severe and challenging. There isn't much guidance on how to file your cryptocurrency taxes at the moment, but hopefully, that will change soon.