Cryptocurrency taxation has been a hot topic with the IRS for years. The IRS has been monitoring cryptocurrency for years. This is why the decision by the Internal Revenue Service (IRS) to enforce a cryptocurrency taxes further did not come to many as a surprise. The cryptocurrency tax laws, are known to have been historically complex for cryptocurrency investors, miners and traders.
The IRS has recently announced they hired a cryptocurrency tax software company called TaxBit as a subcontractor to assist in data analysis and tax calculations for audits of taxpayers with cryptocurrency.
This is another step forward for the IRS is positioning itself to audit cryptocurrency tax payers.
Most past actions by the IRS have been to provide further clarification on the tax guidance related to cryptocurrency transactions then taking actions to detect taxpayers who are not reporting their cryptocurrency activity.
In the past we have seen John Doe summons to collect data on taxpayers at cryptocurrency exchanges including Coinbase, Kraken and other major exchanges. Additionally, we have seen a question added to the top of the 1040 form in recent years asking if any time during the previous year, they received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency.
This subcontract relationship with a cryptocurrency tax software company shows the next step that will allow the IRS to calculate and verify taxpayers capital gains calculations even if they have reported their transactions to ensure this is accurately reported.
The best approach for crypto investors
The best approach for crypto investors is to seek professional guidance and consultation. Seeking the services of an experienced cryptocurrency CPA can help investors protect their assets and avoid criminal charges.
Taxpayers should very carefully consider all the cryptocurrency tax factors while participating in any cryptocurrency transactions. It is important to consult with an experienced cryptocurrency CPA regarding your specific portfolio and/or business.
Here at Camuso CPA, we offer cryptocurrency tax services nationwide. Our team is highly experienced in cryptocurrency as one of the first CPA firms working in the space since 2016. We were the first CPA firm to accept cryptocurrency as a form of payment during 2017. Contact our team today to discuss your portfolio in detail here.