So yesterday, I get home from the office, and there was a small postcard in the mail address to me.
It said this was a reminder that I had some cryptocurrency holding in my account, that I had totally forgotten about on Bittrex a crypto exchange.
So here I am the tax guy, that always asked my client if they have any cryptocurrency accounts, and I “forgot” about an account I created years ago.
Then I hear about the latest news the government just announced.
If you, your friends, or your family are holding onto cryptocurrencies, it’s time to sit up and take notice!
First things first, the IRS isn’t playing games.
Recently, a U.S. district court gave the green light to an IRS summons, pushing Kraken – a major online currency exchange platform – to hand over client details to the taxman.
Now, this isn’t just a few hundred or even a few thousand accounts. We’re talking about details for over 59,000 cryptocurrency holders.
Let’s break it down:
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What is Kraken handing over? Names, addresses, taxpayer identification numbers, and more for those who’ve transacted more than $20,000 USD in any single year between 2016 and 2020. And Kraken isn’t a small player; they serve over 9 million clients across 190 countries, managing a whopping quarterly trading volume of over $209 billion.
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This isn’t an isolated event. The IRS, with support from Congress, is making concerted efforts to ensure virtual currencies like Bitcoin, Ethereum, and others are accurately reported. Other exchanges, like Coinbase, have been subjected to similar orders.
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Expect More Reporting. There’s been an expansion in reporting requirements for digital assets like cryptocurrency. Many crypto exchanges are already handing out 1099-Bs to users. If you’re dabbling in digital currencies, be prepared to see these forms come tax time.
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How is Cryptocurrency Taxed? Cryptocurrency isn’t just some digital play-money; it’s subject to tax. Whether it’s wages, income from mining, gains from exchange, or gains from sales, Uncle Sam wants to know.
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The Scope is Immense. Just to give you an idea, while in 2016 only about 4,164 taxpayers reported crypto transactions, that number jumped to an astonishing 842,888 by 2021. With millions of users on platforms like Kraken and Coinbase alone, one can only imagine the sheer volume of unreported or underreported transactions.
So, why is all this important for you?
If you’ve been navigating the murky waters of cryptocurrency, or even if you’ve just dipped a toe, you need to be on top of your tax obligations.
A lot of people bought crypto through Robinhood accounts, PayPal, online accounts, and even vending machines
Don’t Wait for the IRS Knock. With these recent summonses and the IRS’s heightened interest in crypto, it’s not a matter of if they’ll catch up, but when. We’ve always prided ourselves on keeping our clients ahead of the curve, prepared, and protected.
Let’s Chat. Whether you’re unsure of your crypto tax obligations, or you just want peace of mind knowing you’re compliant, we’re here to help.
Give our office a call at 909.570.1103. Let’s ensure you’re not caught off-guard or book an appointment at http://CallTaxEA.com
Stay safe, stay informed, and remember, it’s always better to be proactive than reactive in this ever-evolving financial landscape.
Warm regards,
Carlos Samaniego
Krypto “Carlos” Tax Man!
P.S. – Cryptocurrency is the future, and with great opportunities come great responsibilities.
Ensure you’re taking every step right. We’re just a call away!
