Want to know more about how the IRS treats cryptocurrencies and digital assets? No sweat, we’ve got you covered. The Internal Revenue Service (IRS) has ruled that cryptoucrrencies are property, meaning you’ll need to owe taxes when you sell, buy, or use your digital currency to make a purchase. Simply holding digital currency, whether it has lost value or gained value, doesn’t mean you owe taxes. You need to experience taxable events in order to pay taxes on your digital assets.
If you sell your digital currency for a profit, you will need to pay a capital gains tax. If someone has held a cryptocurrency for less than one year, he/she will owe a short term capital gains tax. This tax is calculated as if the gain were regular income. If someone has held currency for more than one year, he/she will owe a long term capital gain tax, which can be either 0 %, 15%, or 20%, depending on their total income. For most individuals, it’s 15%.
What happens if you don’t report your crypto capital gains?
The Internal Revenue Service has decided to keep a close eye on cryptocurrency investors to improve its tax collection. They have brought in new rules and regulations for cryptoucrrency traders and investors. Violating those rules and regulations can have some serious repercussions. If someone doesn’t report their cryptocurrency gains, the IRS has a right to enforce a number of penalties, such as criminal prosecution. People who deliberately file a false tax return could be panelized with 3 years in jail, together with a fine of up to $250,000. So, as a crypto trader, you should file your tax returns on time to avoid any potential clash with the IRS.
You can get assistance from online platforms to prepare and file your taxes with greatest accuracy. These platforms or websites are available in abundance. You need to be very cautious when choosing a tax preparing and filling service, since there’s no lack of novices who can do more harm than good. If you don’t know how to file your crypt taxes, you should consider availing services from a professional service provider like Happy Tax Online.
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