IRS GUIDANCE ON VIRTUAL CURRENCY

IRS guidance on virtual currency.  Expanding on guidance issued in 2014 (see notice 2014-21) the IRS has issued additional guidance to assist taxpayers with the reporting requirements for transactions involving virtual currency. The IRS defines virtual currency as: “Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. In  some environments, it operates like “real” currency–i.e. the coin and paper money of the United States or of any other country, that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance–but it does not have legal tender status in any jurisdiction. IRS guidance on virtual currency.

Virtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency, is referred to as “convertible” virtual currency. Bitcoin is one example of a convertible virtual currency. Bitcoin can be digitally traded between users and can be purchased for, or exchanged into, U.S. dollars, Euros, and other real or virtual currencies. The IRS has posted updated frequently asked questions regarding the treatment of cryptocurrency. The FAQs also address virtual currency transactions for those who hold virtual currency as a capital asset.

The IRS is also aware that taxpayers may have failed to report virtual currency transactions and are conducting various educational efforts to bring all taxpayers into compliance. Part of that effort consists of three “soft” letters that have been sent out by the IRS to taxpayers identified as having a virtual currency account. Letters 6175, 6174, and 6174-A, Reporting Virtual Currency Transactions, request that taxpayers review their accounts from tax years 2013 through 2017 to determine if additional reporting is required. For more information on the definition of a capital asset, see Publication 544, Sales and other Disposition of Assets.

Now that the IRS is requiring reporting of virtual currency on tax returns, its only a matter of time before its taxed. If you have unfiled tax returns, we can help. We can get your into compliance by filing all past due tax returns, the going thru Tax Resolution to determine your Tax Relief options in the Internal Revenue Service code for Tax Relief, including the IRS Fresh Start Program. Of the dozens of Tax Resolution Companies in America, Federal Tax Resolution is the Fourth Oldest. We have led in our industry, and our Tax Resolution Services concentrate on Superior Service for our clients. If you are a business owner with payroll tax issues, or a Trust Fund Penalty, we can hep with that also. Call today for a Free Tax Consultation. 1-888-689-7861