TUCSON, Ariz. (KGUN) — If you’re into cryptocurrency, you should take special care to pay your taxes on it because if you don’t pay it can cost you some major cash down the line.
Riana Linsky, Senior Manager with Dark Horse CPA in Tucson, says the topic of cryptocurrency is growing and rumors about not needing to pay taxes on the currency are incorrect.
“There’s a lot of misconceptions out there right now. The IRS stated its position on cryptocurrency in 2014. General tax principals that are applicable to property transactions like stocks and bonds are applied to cryptocurrency as well,” Linsky said.
For years, cryptocurrency income reporting was based on an honor system, but that guideline is about to change.
“The big hot item topic is the crypto currency reporting where a lot of people were able to fly under the radar for a number of years and that is coming to an end,” Linsky said.
Linksy says in the past IRS wasn’t getting as many claims of cryptocurrency income as expected.
“The infrastructure bill was signed into law on November 15th, the cryptocurrency exchanges like Coinbase will now be required to file a 1099-B at the end of January of the next year in order to get it to the IRS for its matching program,” Linsky said.
The numbers reported on both sides must match-up and while the laws officially take effect in January of 2023, beware, especially if you haven’t been paying up on past gains of cryptocurrency.
Another interesting factor is the tax guidelines about taxing all illegal activity, stolen goods, bribes and kickbacks. The laws are not new but very interesting and also based on the honor system.
"It’s actually what helped take Al Capone down in 1931, he was engaged in illegal activity, and he wasn’t filing his tax returns,” Linsky said.
By the way, you won’t need to pay taxes on stolen goods as long as you give it back to the person you stole it from in the same year. However, you do have to pay up if you find something of value on the street.
"If I come across a bag in the park and it has $5,000 in it and I do my best to find its rightful owner and I’m not able to find its then I’m required to claim $5,000 of taxable income,” Linsky said
The bottom line is to check with your tax expert to make sure you have your paperwork in order. To avoid that unwanted audit notice in the mail.
"The IRS and state taxing authority have a pretty deep reach. If someone gets pulled for audit, they can go back for a number of years so it could be a black hole for some taxpayers,” Linksy said.