11 hours ago |
By Samuel Haig – |
IRS Reminds Taxpayers to Report Virtual Currency Earnings
The United States Internal Revenue Service (IRS) recently published a document reminding taxpayers that income derived from virtual currency transactions must be reported on income tax returns. The IRS states that taxpayers who fail to report virtual currency earning may be audited or made liable for “penalties and interest.”
IRS Reminds U.S Crypto Investors of Tax Obligations
With the U.S tax deadline of April 17 fast approaching, the United States Internal Revenue Service has sought to remind citizens profiting from virtual currency transactions of their looming tax obligations.
The IRS states that “Virtual currency, as generally defined, is a digital representation of value that functions in the same manner as a country’s traditional currency.” The regulator notes that “Because transactions in virtual currencies can be difficult to trace and have an inherently pseudo-anonymous aspect, some taxpayers may be tempted to hide taxable income from the IRS.”
Undisclosed Crypto Income May Incur Penalties
The IRS states that “income from virtual currency is reportable on […] tax returns,” adding that “Virtual currency transactions are taxable by law just like transactions in any other property”. Should taxpayers fail to accurately report income earned in the form of virtual currency “can be audited for those transactions and, when appropriate, can be liable for penalties and interest”.
The IRS states that in “extreme situations, taxpayers could be subject to criminal prosecution for failing to properly report the income tax consequences of virtual currency transactions.” Said criminal charges “could include tax evasion and filing a false tax return”. The IRS added that “Anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000,” and “Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000.”
Due to its tax status as property, “virtual currency is subject to information reporting to the same extent as any other payment made in property” in the U.S.