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Why You Must Report Bitcoin and Cryptocurrencies Gains to the IRS

 

In an article on Accounting Today, it is reported that over 14,000 U.S. taxpayers have used Coinbase to buy, sell, send or receive Bitcoins and other cryptocurrencies from 2013 to 2015. Their accounts register transfers of at least $20,000. Very few of those people, however, have reported any gains to the IRS from their Bitcoin investment. The Agency is now taking crypto tax evasion really seriously and making the necessary moves to ensure no one goes under the radar. So if you were considering skipping the part about cryptocurrency gains on your tax return, just know that this is a very bad idea.

 

What is IRS doing to Catch Cryptocurrency Tax Evaders?

The IRS has set up a new team of specially trained agents who focus on international crimes, including those involving cryptocurrencies. This is important because the Blockchain technology is new, complex and unfamiliar to most people. Therefore, it creates a huge backdoor for tax evaders and other criminals to make billions of dollars illegally.

The work of the agents also helps criminal investigators who work on capturing drug dealers and malware ransomers. Over the past few years there have been numerous cases of big organizations falling victims to such criminals. Surely, you wouldn’t want to fall in the same category as them, so make sure you report your crypto gains.

Is There Any Way to Keep my Bitcoin Investment a Secret?

No. And if you do, it is illegal. Coinbase was required to release information on all accounts that had at least $20,000 at any point over the last year. The IRS will eventually find out if you haven’t declared your Bitcoin investment or transactions deliberately. If they do, you will be treated as other tax evaders who do not report foreign or domestic financial assets. This means you will receive substantial penalty and face criminal prosecution.

 

Is it Too Late to Amend my Previous Tax Returns if I have Bitcoins?

You can still amend your previous tax returns if you haven’t declared your cryptocurrencies. We recently wrote an article that explains the process in more details. You can find it here.

 

Take out

  • The IRS has recruited more staff to investigate tax evaders
  • Not reporting your Bitcoin and cryptocurrency gains is a crime
  • You will be caught and penalised (potentially prosecuted) as more data is shared with the IRS
  • You can amend your previous tax returns if you haven’t declared your crypto assets

As experienced CPAs we recommend that you follow the rules and report all of your financial assets on your annual tax returns. This goes for both traditional investments and cryptocurrencies, in the US and abroad. Of course, we fully support smart tax planning and  are always ready to assist you in building and implementing the right strategy that works. If you want to talk to one of our consultants, contact us today at support@fascpaconsultants.com.

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Fulton Abraham Sanchez, CPA

Fulton Abraham Sánchez, CPA is a Certified Public Accountant, specialized In Tax Planning, International Business, Wealth Management and Offshore Banking. You can email him to fa@fascpaconsultants.com or follow us on Facebook : FAS CPA & Consultants.

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