What Is Cryptocurrency?
Cryptocurrency has been a hot topic of discussion for many years now. For those who may be new to the subject, cryptocurrency is a form of digital currency or payment that can be exchanged for products and services. Low fees, online safety, easy access, and the potential for profit are a few reasons why cryptocurrency has become so relevant, especially in recent years. You could even say that cryptocurrencies are considered the future of money by many individuals.
However, it has been recognized that millions of taxpayers have neglected to report their use or trading of cryptocurrency, making themselves central targets of Operation Hidden Treasure –a new IRS initiative that identifies taxpayers who have unreported income from currency transactions.
If you have invested in cryptocurrency, prepare for increased potential of IRS audit.
The IRS plans to significantly increase the focus on cryptocurrency by hiring outside contractors who are experts in the subject to help them identify virtual currency investors who have submitted tax returns that omit or contain incorrect information regarding their transactions.
Additionally, the following question has been put on Page 1 of the Form 1040: “At any time during 2020, did you sell, send, exchange, or otherwise acquire financial interest in any virtual currency?” to further increase focus and awareness for taxpayers.While Floridians may view this law as controversial, many will be surprised to learn that they will simply be paying tax on something they were supposed to be paying for years.
Very few know that consumers who did not pay sales taxes on their online orders are supposed to download a form a pay those associated taxes to the state on their own. The good news is that the new legislation will also forgive those who have neglected to voluntarily pay taxes on remote sales that occurred before the effective date, and will protect them from being audited in the future.
Turn to your CPA for assistance
It has been estimated that roughly 18-21 million taxpayers will need to consider cryptocurrency transactions while preparing for the 2021 tax season. As of today, there are over 5,000 types of cryptocurrency with single taxpayers making thousands of transactions yearly. As a result of the IRS performing more audits along with the overall complexity of this process, it is predicted that those who have been involved with cryptocurrency will rely heavily on their CPA for assistance.
In contrast to stocks and bonds, there is no brokerage statement or 1099 for cryptocurrency. This means that taxpayers need to be transparent with their CPA to work on each individual transaction made throughout the year.
At Brock CPA, we stay up to date with the ever-changing tax laws and work with you to analyze changes in your business and personal situation to see how tax law changes may impact you. We pride ourselves in smart, ethical, We understand that navigating the ever-evolving rules regarding cryptocurrency imposed by the IRS can be challenging for many. Brock CPA consists of financial experts who provide a variety of taxation and accounting services tailored to your specific needs. We encourage you to contact our offices to learn more about our tax services today.