The IRS can assess back taxes, interest, and penalties for the failure to report Bitcoin Income. The IRS has made Bitcoin tax compliance a priority as part of its Virtual Currency Compliance campaign.
Key Insights We Will Discuss:
- Your Bitcoin tax obligations
- Potential consequences of failing to report Bitcoin income
- How to correct your non-compliance
Taxation of Bitcoin Income
Bitcoin is treated as property for tax purposes. This means that you’ll generally be taxed on the fair market value (FMV) of any Bitcoin you receive on the date of transfer. You can determine the value using any public exchange
If you invest in Bitcoin, your gains or losses will be subject to the typical capital gains treatment. This could result in either a short-term or long-term capital gain or loss.
These rules apply to Bitcoin and all other types of virtual currency.
Penalties for Failure to Report Bitcoin Income
If you don’t report your Bitcoin income, the IRS may audit your return. If the IRS examiner determines that you understand your tax liability, you could face back taxes, penalties, and interest.
The IRS may also decide to pursue criminal tax charges for certain cases of Bitcoin tax fraud. Typically, the IRS only seeks criminal tax prosecution for particularly egregious cases.
How to Correct Your Non-Compliance
The IRS has started sending out informational notices to taxpayers who may have unreported Bitcoin income. If you receive one of these notices, this should be a major red flag that the IRS knows about your Bitcoin income.
You should act immediately to amend your tax returns and pay off your back taxes. If you don’t take action, an IRS audit notice may be forthcoming.
Contact an Attorney
Like the Ayar Law Facebook page to learn more about Bitcoin taxation or call us at 800-571-7175 to get free, no-obligation legal advice about your tax matter.
- All of your Bitcoin income should be reported on your tax return.
- You could face back taxes, penalties, and interest for failing to report and pay taxes on Bitcoin income.
- Act quickly if you need to amend your tax returns to correct your non-compliance.
- Contact Ayar Law today for free, no-obligation legal advice about your tax matter. 800-571-7175