This is the first video in the Top 8 Cryptocurrency Tax Problems. There are 8 videos in this series covering all top 8 virtual currency taxation problems. Links to all 8 videos can be found below.
My name is Mark Robert, Crypto Tax Accountant and Advisor
This is video I share what I found in my 5 plus years of helping individuals and business with their crypto taxes during my 17 years as an accountant. These “Top 8 Crypto Tax Problems” can help virtual currency investors, traders, miners, crypto entrepreneurs and businesses with crypto transactions.
Be sure to watch all 8 Crypto Tax Problems and solutions to avoid getting blind-sided by an IRS or state tax authority consequences you didn’t see coming. Sometimes people don’t know what they don’t know. In crypto that’s truer than in other areas.
If there’s another big ugly Cryptocurrency tax problem out there you think I missed, please add it to the comment section below and I’ll be sure to follow up with you.
The IRS letters have gone out to tens of thousands of people who had Crypto transactions in previous years, but never reported them. This normally means enormous fines, penalties and having a severe fraud problem with the IRS if you failed to report or under reported your cryptocurrency transactions in prior years tax returns.
If you do not receive or respond to the letter, the tax account you have at the IRS may be examined by an IRS agent.
Second: The new individual 1040 income tax form has a checkbox that asks, “At any time during the tax year, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
If you check “No” to this question but had crypto transactions for that year, you’re filing a fraudulent tax return…
…Taxpayers can’t hide any longer.
A number of people falsely believe that crypto is so anonymous that compliance is not enforceable. Some people believe that this is enough of a Wild-West they not to have to report, or worse, a refusal to report completely.
You probably know, the IRS went as far as to issue a legal demand to Coinbase, one of the largest cryptocurrency exchanges, requesting the release of transactions from multiple prior tax years. This helped the IRS find taxpayers who did not report their crypto transactions as legally required on their prior year’s tax returns.
An audit of a blockchain is the easiest audit for the IRS to do. The IRS recently paid over $10 million dollars to a company called Chain Analysis that runs analytics on the blockchain to identify tax fraud (that is non-reported or under stated Virtual currency transactions) and tax fraud. Now Crypto transactions are more transparent, easier to track than even physical cash transactions which can’t be tracked on a computer.
Solution: The easiest way to solve this problem is to ensure you disclose any and all of your crypto activity, when filing your taxes. Now what do you do if you didn’t report your crypto transaction or did not fully report all of your Crypto transactions?
If it was an honest mistake or just overlooked the need to disclose those transactions, my advice is to amend any prior tax return where you failed to report or under reported your transactions. If you wait until Uncle Sam finds your transactions, it’s going to be a lot more trouble for you, than if you’re proactive, Amend any previous inaccuracies and come clean now. Because if you just acknowledge, “I made a mistake or overlooked something and come clean” by amending your returns, it looks much better and you’ll likely have a much better outcome.
However, when the IRS eventually finds your prior tax returns hid income, gains or failed to disclose these transactions, even if it was some years ago, it then could considered be tax fraud by the IRS and the consequences are much higher. If you feel you’re not capable of doing this effectively yourself and/or is something that could take you days or weeks of frustration to labor over to complete, get help.
I’d really like know: Do you or someone you know got into trouble with federal or state taxes due to virtual currency?
Please let me and the community about it in the comments below.
Also, please let me know if you’re aware of other strategies the IRS is using to find crypto transactions that went unreported.
If this video opened your eyes in anyway or it just cemented what you’re already aware, please like this video now.
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My free videos often SAVE crypto investors, traders, miners and those who own/manage other crypto related companies a lot of pain/frustration/wasted time and gives them peace of mind.
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