The IRS has been zooming in on cryptocurrency reporting with increasing interest in recent years. And the last thing you want is to lose money and time reconciling your tax liability, says Douglas Boneparth, a New York City-based certified financial planner.
So as tax season gets into full swing, here’s a quick guide to which cryptocurrency activity is reportable, how it’s generally taxed and the best ways to prepare.The IRS treats virtual currencies as property, which means they’re taxed similarly to stocks. If all you did was purchase cryptocurrency with U.S. dollars, and those assets have been sitting untouched in an exchange or your cryptocurrency wallet, you shouldn’t need to worry about reporting to the IRS this year.
Gains are then taxed at either the short- or long-term rate, depending on how long you held the asset. Short-term gains for assets held less than a year are taxed as ordinary income, while long-term gains for assets held more than a year are generally taxed at 0%, 15% or 20%, depending on your taxable income and filing status.
For example, say you purchased $2,000 worth of a cryptocurrency in January 2021 and sold it two months later for $5,000. That $3,000 capital gain would be subject to the short-term capital gains rate. Once you’ve calculated your gains and losses on Form 8949, you’ll need to report them on Schedule D of Form 1040.If you omit information on your taxes, there’s a risk of penalties, fees and, in severe cases, even tax evasion charges. And with the revision of Form 1040, which now features a direct yes-or-no question on whether you received, sold, exchanged or disposed of cryptocurrency, the IRS is signaling that those who fail to report won’t be able to feign ignorance, Gordon says.
پاکستان تازہ ترین خبریں, پاکستان عنوانات
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