Cryptocurrencies and Taxes
By Bobby Hoffman
Cryptocurrencies like Bitcoin, Ethereum, Ripple, Litecoin and many others have become extremely popular in recent years and for good reason but, as with anything new (and everything taxes for that matter), there is still uncertainty about the tax ramifications once you have started buying, selling and using them.
In the eyes of the IRS, cryptocurrency, or “virtual currency” as they like to call it, is considered property and as the value of the currency regularly changes, the buying and selling of this digital money is considered a taxable event. Did you know that when you purchase cryptocurrency at a certain price and then trade it off by buying something as simple as a doughnut or selling it on an exchange, the sale is subject to capital gains tax? According to CNN Business, these obligations have not been made abundantly clear and now the IRS is enforcing IRS Notice 2014-21 by sending as many as 10,000 cryptocurrency holders notices warning them about taxes owed on these transactions. The IRS is currently sending out three types of letters, Letter 6173, Letter 6174 and Letter 6174-A notifying taxpayers of these ramifications and, depending on the severity of the issue, taxpayers may be required to respond or be subject to an audit.
If you happen to receive one of these letters we strongly encourage you take it seriously by responding promptly and if you are unsure how to proceed please feel free to contact the Hoffman & Associates tax department for assistance at 404-255-7400 or info@hoffmanestatelaw.com.
