As per experts, the taxman is looking for his share of transactions made using bitcoin and its like. This would be a rollercoaster ride for some cryptocurrency investors could be about to take another tax-time lurch.
When bitcoin surged from less than one dollar in 2010 to $997 at the start of the 2017 to nearly $20,000 before settling back to around $8,500, such wild fluctuations in the value of digital currencies have exposed investors to tax bills the value of their coins may no longer meet.
Anything purchased using a digital currency is liable to be taxed as a capital gain says the Internal Revenue Service or the IRS. So capital gains have to reported to the IRS by anyone who has cashed out or paid for anything using cryptocurrency.
The forms used by the IRS to report income other than wages, bonuses and tips – on digital currencies are not required to be issued by crypto-brokers. but, regardless the confusion, individuals are still responsible for reporting gains.
During 2013 to 2015, the popular platform for trading bitcoin – CoinBase was ordered by a US district court judge in California in November to turn over identifying information on accounts worth at least $20,000.
The capital gains ruling is not the only crypto-complication. The profits are typically long-term capital gains if an investor sells a cryptocurrency after holding it longer than a year. Even the losses are not deductible against future tax years.
Acountants are often unwilling to familiarize themselves with crypto-accounting rulings says William Perez, a tax accountant at the online tax filing and advisory service Visor. He further asserts, “I see resistance to reporting the investments made by Cryptoinvestors. There is a group who’ve got a 1099 from Coinbase but they don’t know what it means.”
The way tax law is currently written, the government has no way to force crypto-brokers to issue trading information the way stock brokers are required to do.