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They were affected by the Coinbase Exchange glitch in December 2017, where BC price was posted at $9K but the real price was $3K, so when they submitted their BC for sale, it never got sold at that price.
Cryptocurrencies mining and trading can create three tax consequences:
- Crypto Mining
- Crypto Arbitrage
- Capital Gains
Like Kind Exchange
Cryptocurrencies are not a real property like real estate. You cannot apply for a 1031 like-kind exchange to defer taxes.
Now here the important things you need to remember when you are reporting your cryptocurrencies on your tax return.
- If you hold cryptocurrencies but haven’t sold any, you didn’t realize any gain.
- If you sold cryptocurrencies and realized gains or registered losses, it is your responsibility to report this to the IRS on the relevant form (1099-K in most cases, but contact your CPA or tax advisor to confirm). Coinbase won’t send you the form unless you’ve had $20,000 in gains and at least 200 transactions.
- Cryptocurrencies are regarded as property for tax purposes so you need to provide details about:
- The date you bought the crypto
- The price at which you bought the crypto
- The date you sold your cryptocurrency
- The price at which you sold the crypto
- Failure to report transactions will be penalized. The IRS may discover what you tried to hide later and you will still have to pay taxes with interest and penalties on top. If they suspect that you have deliberately omitted the crypto transactions from your report you could be prosecuted with criminal charges for tax evasion. This means you could spend up to 5 years in prison and pay up to $250,000 penalty.
- Keep good records of all of your crypto transactions. This will help you prepare your next tax return much more easily.
Check Our Video Presentation Tax Planning For Cryptocurrency U.S. Investors
Click The Link below and Check Our Taxclass for U.S. Crypto Investors - How The IRS Plans To Catch Tax Fraud From Crypto Investors
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