The 2019 tax season in the U.S. starts on Monday. As a result, taxpayers will have to provide information about their assets, including cryptocurrencies. People should disclose information about any cryptocurrency transactions in 2019. It is a very important moment for the taxpayers, as they should be careful when it comes to reporting their crypto transactions.
The question regarding the cryptocurrency can be found on the first page of Schedule 1 of the individual income tax return. The Internal Revenue Service (IRS) wants to know whether the person received, sold, bought or otherwise acquired any financial interest in any virtual currency.
Moreover, when filling out this document, people should take into consideration that there are many ways to interact with cryptocurrencies.
Furthermore, the interest in cryptocurrencies is increasing as the IRS wants to gather information about the crypto assets. In Summer 2019, the agency sent letters to more than 10,000 taxpayers with cryptocurrency transactions.
The purpose of this letter was to remind taxpayers to report and pay taxes they owed to the government. Some of them may have failed to provide information about their cryptocurrency transactions.
Crypto owners can face serious consequences if he or she will intentionally or unintentionally violate the rules. They could face prison time as well as the fine up to $250,000.
Taxes and crypto assets
It is worth mentioning that the IRS treats virtual currency as property. It is similar to stocks or other investments. However, there are differences when it comes to reporting the crypto a person bought a crypto person received as a salary.
For example, if a crypto owner bought Ethereum and then sold it or exchanged it for something else, a person should pay a tax. This taxpayer will be responsible for taxes related to the gain.
The situation is different when it comes to the cryptocurrency a person received from an employer. In that case, this employee should pay the federal income tax as well as FICA tax and unemployment taxes.
Crypto mining is another story. A person involved in crypto mining should have to pay tax from the taxable income.