LUTZ BUSINESS INSIGHTS
VIRTUAL CURRENCY + CRYPTOCURRENCY
The 2019 tax filing season is just around the corner and with that brings potential changes to tax compliance forms. It is anticipated that the IRS will be adding the following question to this year’s forms: “At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
The IRS is aware that taxpayers may have failed to report income and pay tax on virtual currency transactions or have reported their virtual currency transactions incorrectly. The IRS is actively addressing potential non-compliance in this area ranging from taxpayer educational letters to audits to criminal investigations.
Most recently, the IRS has issued Revenue Ruling 2019-24 and frequently asked questions (FAQs) to assist taxpayers in understanding reporting obligations for specific transactions involving cryptocurrency. The IRS explains cryptocurrency as a type of virtual currency that uses cryptography to secure transactions. These transactions are digitally recorded on a decentralized, public ledger. In this new Revenue Ruling, the IRS explains when cryptocurrency should be reported as gross income as a result of certain different types of transactions.
Since this cryptocurrency is considered “property, not currency” for federal tax purposes, the IRS has waived virtual currency from foreign bank account reporting FINCEN 114 and Form 8938 Statement of Specified Foreign Financial Assets. However, if you have dealt with cryptocurrency in the past or are currently engaging in cryptocurrency transactions, please discuss with your tax advisor. This will enable appropriate reporting decisions to be made, such as reviewing prior transactions to determine if an amended return should be filed, as well as reporting current transactions accurately for this tax year.
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