5 Things You Want to Think About This Tax Season
It’s the most wonderful time of the year. Oh ,wait, no it’s not. Tax season is typically that dreaded time of year when all regrets of not getting organized sooner start to come out. But this year, you don’t have to be that person.
When you’re putting together all of your tax documents, you may want to think about including information about your cryptocurrency. The Internal Revenue Service sent out a reminder last month to taxpayers letting them know that income from virtual currency transactions needs to be reported on their income tax returns.
It would be wise to contact a qualified tax professional before filing any returns to the IRS to make sure your assets are protected. Below are a few topics you might want to consider covering:
1. What you need to report
If you purchased bitcoin and held it, you don’t necessarily have to do anything. The IRS currently treats bitcoin and cryptocurrency like stock, so unless you did anything after you acquired it, you should be good to go. If you sold bitcoin and realized a gain or loss, you’ll likely need to report it and pay taxes on any capital gains.
2. What records to keep
You may want to keep track of every transaction you make, even if it was just a cup of coffee from a shop that accepts virtual currency. If you can document your transactions and equate them to U.S. dollars, you’ll be prepared.
3. Payment in virtual currency
It would be helpful to know how you need to report your earnings if your income came in the form of cryptocurrency, whether you’re an employee or an independent contractor.
4. Forms to use
You’ll want to make sure you’re using the correct forms when reporting your taxes. For any capital gains and losses, Schedule D is a good place to start. If you paid people with cryptocurrency — whether they were employees or independent contractors — you’ll need to report their earnings and issue the proper documents.
5. Who to consult
We recommend consulting a tax professional for any and all of your tax-related cryptocurrency questions. If you think taxes are complicated, you’re not alone. Throwing crypto into the mix can be an entirely different kind of a headache.
