Cryptocurrency and the IRS – Some Important Updates
Cryptocurrency is treated like any other investment asset for federal income tax purposes and not “money.” Therefore, taxpayers that sell cryptocurrency for a gain incur taxable capital gains for income tax purposes.
It is likely that a fair amount of cryptocurrency has been sold for gain by U.S. taxpayers without that being reported – either out of ignorance or intentional tax avoidance. Importantly, cryptocurrency transactions are not invisible but are available for review on the blockchain. Some sleuthing may be required to tie a particular transaction to a taxpayer, but this is often not that difficult. Further, cryptocurrency exchanges may be able to identify crypto transactions and tie them to specific persons.
Taxpayers with gains in the past or present years should note Operation Hidden Treasure . . .