Money is great. No doubt about it. Commercials are so vital around. Money is one of the most desirable things in a man’s life. Not until there are taxes to be filed. That is a pain. The process and just the idea of letting go of some amount.
The Internal Revenue Service (IRS) watches over all the investment cradle. Just like every investment and revenue is reported so is the same for cryptocurrency and assets. You heard it right there are tax returns for cryptocurrency as well.
Over 10,000 cryptocurrency holders have been notified by the US body to alert those who might have missed reporting their crypto holdings and transactions in their tax returns. The notice which was the last sent and holds quite a weight is known as CP2000.
Cryptocurrency investments come with a sort of anonymity then how is it that the agency IRS could track down the asset hoarded? This is because eminent exchanges like that of Coinbase send out a form called ‘Form 1099-K’ where they enlist the gross amount of transactions that are done by an investor over the exchange.
1099-K, however, does not report losses or gains and merely report the amount that was involved in the transactions. The CP2000 is actually a notification of any impending information. So, what is to be done if one receives one such notice?
- Calculate all the cryptocurrency amounts leading to tax correctly because the ones in the 1099-K form were, maybe, misleading. The form does not take cost basis information which is absolutely essential to infer losses/gains.
- Once you are aware of the exact amount that you owe, you can then seek help from a cryptocurrency tax professional or seek information from portals like Trybe. All this will equip you to respond to the IRS and help you achieve a strong case in case the defaulter charges do not match.
- Try using crypto tax software that helps file these taxes and also produce tax reports that are absolutely valid. A software of this kind is TurboTax.
- Ensure that the fair market value is with you apart from the cost basis. Having the fair market value is essential to show the amount that you received against what you bought for.
Understand that the IRS treats cryptocurrency as property and not as currency for tax purposes. So, just how tax reporting liabilities are incurred on properties, it is the same for cryptocurrencies.