cryptocurrency tax resolution

Cryptocurrency Holdings & Tax Resolution

In this week's post, we'll discuss why the IRS cares about your cryptocurrency holdings, and why now is the time to come clean.

After years of flying under the radar, taxpayers who hold Bitcoin, Ethereum, Litecoin and other cryptocurrencies are finally getting their fair share of scrutiny from the IRS. The tax agency has figured out that cryptocurrency is here to stay, and that the mind-boggling returns early adopters have enjoyed could be a boon for government coffers.

The tax agency has also figured out that many holders of cryptocurrency could owe a lot on these ethereal assets. The currency may be virtual, but to the IRS the taxes due are all too real.

NOTE: we encourage all readers in need of IRS tax resolution to contact us for a free, no-obligation tax resolution consultation.

Blackhawk Tax Solutions, LLC

lauren@blackhawktaxsolutions.com

(719) 694-5505

www.blackhawktaxsolutions.com

If you think you might owe back taxes on your cryptocurrencies, contact us today.

The Illusion of Anonymity

If you have been failing to report your cryptocurrency holdings, you might want to rethink your strategy. After years of taking a largely hands off approach, the IRS is catching up in a big way. The tax agency is pulling out all the stops to recover the money the government is owed.

Many holders of cryptocurrency are under the impression that their transactions are totally anonymous. They think that there is no way for the IRS, or anyone else, to tell how much they hold or how they use their virtual coins. That may be a soothing fiction, but the reality is far different.

The truth is the IRS has a wide range of options at its disposal, from official form filings to subpoenas and legal documents, to find the real world identities of cryptocurrency holders.

Did You Get a 1099-K? So Did the IRS

In some cases, holders of cryptocurrency are finding tax forms in their mailbox. If you receive such a form, you can be sure the IRS received a copy as well.

When you file your taxes, automatic matching programs will compare the amount you claimed with the amount on these automatically generated forms. If there is a mismatch, you will be hearing from the tax agency.

One of the most common forms used to report cryptocurrency holdings and transactions is the 1099-K. For sellers on eBay and some freelancers, this form will already be familiar, but it is being extended into the virtual world as well. If you receive a 1099-K form this year, it is time to come clean with your cryptocurrency holdings.

The Cryptocurrency Question and Your Tax Form

Until now, cryptocurrency holders could, and often did, plead ignorance. They could claim they did not realize their Bitcoin, Ethereum and other virtual holdings were taxable, and they could back up that assertion by saying the IRS never asked them about these assets.

The validity of that excuse may have been questionable, but with the 2020 tax year even that thin veil of supposed ignorance will be gone. Starting in 2020, taxpayers will be asked directly if they bought, sold, transacted or otherwise acquired any cryptocurrency. They will be expected to answer that question in a truthful manner.

The wording of this question means anyone who holds any type of cryptocurrency would be required to answer in the affirmative. Even so, simply holding virtual coins in a cryptocurrency wallet does not necessarily mean any taxes will be due. Someone who simply holds cryptocurrency but makes no transactions should not owe any taxes, just as a holder of stock does not owe taxes until those shares are sold.

Clearly, the IRS is getting serious about cryptocurrency. This was drawn by a combination of past returns, unreported taxes and increased exposure of these alternative forms of payment. For holders of Bitcoin, Ethereum and other forms of cryptocurrency, the days of flying under the radar are over. So make this the year you come clean, so you can enjoy your cryptocurrency without worrying about the IRS.

Our firm specializes in tax resolution and our experts can also help with cryptocurrency tax questions. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.

Blackhawk Tax Solutions, LLC

lauren@blackhawktaxsolutions.com

(719) 694-5505

www.blackhawktaxsolutions.com


Why Early Adopters of Cryptocurrency Should Explore Their Tax Resolution Options Now

Why Early Adopters of Cryptocurrency Should Explore Their Tax Resolution Options Now

The stunning rise in the value of Bitcoin, along with the myriad of cryptocurrencies, is surely one of the biggest financial stories of the 21st century, at least so far. What started out as a mere curiosity and niche project for programmers and geeks has quickly blossomed into a full-fledged financial asset, and an increasingly popular one at that.

For early adopters, the financial returns have been simply mind boggling. You may have heard about the generation of Bitcoin millionaires, and there are plenty of those newly rich investors to go around.

The IRS and Cryptocurrency

Given the rapid rise and relative anonymity of Bitcoin transactions, it was only a matter of time before the IRS caught on, and the tax agency has caught on - and caught up - in a big way. After years of taking a hands-off approach to cryptocurrency investments, the IRS is now paying close attention - and requesting the real world identities of those supposedly anonymous buyers and sellers.

While every investor in cryptocurrency should be aware of their potential tax liability, the problem could be even more acute for early adopters - the very investors who have profited the most from this unique form of digital payment.

As with all things tax, the Internal Revenue Service is likely to start where the big money is, and the tax agency has increasingly set their sites on early adopters. If you were prescient enough to buy into the promise of Bitcoin and other cryptocurrencies when everyone else was looking the other way, it may be time to settle up with the IRS.

For early adopters of cryptocurrencies like Bitcoin, a little proactivity could go a long way. The IRS has already requested records from Coinbase and other big cryptocurrency exchanges, and it is only a matter of time before they catch up to you and your profits.

The Future of Cryptocurrency and Taxes

For now, the tax agency claims it has requested information on only the largest accounts, but it is reasonable to assume the IRS will expand its scope in the future. If you have booked your Bitcoin profits and want to settle up with the IRS, contacting a tax resolution agency now could save you a lot of money - and potentially a lot of grief.

There are many reasons for early adopters of Bitcoin and other cryptocurrencies to work with a tax resolution service, starting with the complexity of reporting profits in digital currency. The IRS is still fairly new to regulating and taxing cryptocurrency, and there has been a lot of confusion and misinformation over how profits are taxed and how people are supposed to pay.

Regardless, if you haven’t reported your crypto earnings or filed your taxes for the past few years, it’s time to do so now. By working with a tax resolution expert, you will gain access to a world of expertise, so you can draw on that knowledge to accurately report how much cryptocurrency you have purchased, how many coins you have used and how much you have gained or lost on each transaction.

This accounting is very important, since it could impact not only your tax bill but any future taxes and penalties. According to the IRS, holders and users of cryptocurrencies have been responsible for reporting their gains all along, and failing to do so could mean big penalties and lots of back interest.

How Do I Fix My Cryptocurrency Tax Problems?

A tax resolution specialist will be able to guide you through what is surely one of the most complicated tax situations in many years. The very complexity of the cryptocurrency market makes navigating the tax consequences especially difficult, and it never hurts to have some expert assistance in your corner. So do yourself a favor and come clean now - the IRS has finally caught on to the cryptocurrency revolution, and the tax agency is making up for lost time, and making the lives of early adopters a lot more difficult.

If you want an expert tax resolution professional who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.

www.blackhawktaxsolutions.com

Contact Us!

(719) 694-5505

lauren@blackhawktaxsolutions.com

13570 Meadowgrass Drive, Suite 205

Colorado Springs, CO 80921