Bitcoin report to irs

IRS guidance on the tax treatment of cryptocurrencies already exists. However recent developments complicate matters. The currently issued guidance does not address cryptocurrency splits also known as fork transactions. Holders of Bitcoin received one Bitcoin Cash unit for every Bitcoin they held at the time of the split making Bitcoin Cash a separate financial instrument. As a result this bitcoin report to irs it taxable — so recipients of Bitcoin Cash should include the transaction on their income tax returns.

Since a bitcoin report to irs is not technically a security or a debt-like interest the transaction is considered neither a dividend nor interest bitcoin report to irs. So how should you report the transaction? Another reporting alternative is to use Form where you report the sale of bitcoin report to irs assets. By transferring a bitcoin report to irs amount of your basis from the original investment you will reduce your taxable income.

This reporting method also has the advantage of allowing you to offset the capital gains with capital losses and carryovers. Beware however that this method is less likely to be accepted by the IRS. Your selling price would be whatever value you sold it for less any commissions or fees on the sale.

Also remember that for your tax return filing your holding period would start from the split date of Aug. Some will argue that cryptocurrency splits such as Bitcoin Cash qualify as tax-free exchanges; however this view is unlikely to hold up to IRS scrutiny since none of the corporate reorganization non-recognition events under Section apply.

Bitcoin Cash is economically different from Bitcoin and therefore should be viewed as a new category of financial instrument. Over the past several years many investors sold cryptocurrencies including Bitcoin but did not report any taxable income from the transactions while others used Section like-kind exchange laws to postpone taxation.

The IRS is none too pleased by all of this and is taking action. The IRS estimates that hundreds of thousands of U. Combined with the recent meteoric rise in prices the IRS is hungry for the potential to collect billions in interest penalties and back taxes.

Recently for example the IRS summoned a large cryptocurrency exchange Coinbase to hand over its customer lists. Cryptocurrency investors need to be aware of the evolving nature of taxation in this space in order to avoid IRS problems. This is an emerging issue and one on which you can bet the IRS is not going to stand down. As always consult a tax professional for details about your particular situation. Lindemeyer's advisors understand the challenges you face and can offer guidance on everything from complex accounting questions and payroll interpretation to mastering advanced features of QuickBooks.

Find out how our ProAdvisors can help. Skip to primary navigation Skip to content Skip to footer Client Gateway. Uncategorized IRS guidance on the tax treatment of cryptocurrencies already exists. Why Cryptocurrency Bitcoin report to irs Are Not Tax-Free Exchanges Some will argue that cryptocurrency splits such as Bitcoin Cash qualify as tax-free exchanges; however this view is unlikely to hold up to IRS scrutiny since none of the corporate reorganization non-recognition events under Section apply.

Beware the IRS Over the past several years many investors sold cryptocurrencies including Bitcoin but did not report any taxable income from bitcoin report to irs transactions while others used Bitcoin report to irs like-kind exchange laws to postpone taxation.