Web: Bitcoin investors beware: The IRS wants its piece of the action

September 2018 by: From The Web

If you didn't tell the IRS about your gains from bitcoin or other cryptocurrencies in the past, you might regret it this year.


With bitcoin down more than 50 percent so far in 2018, there's a chance some investors have triggered (or will trigger) a tax loss this year by either selling, trading or spending their digital assets. And while those losses can be used to offset any other investment gains, it could raise eyebrows at the IRS if it's the first time the agency is hearing about your crypto holdings.


"If I were in those shoes, I'd think about my past transactions and whether there were gains," said Sarah-Jane Morin, a partner in the San Francisco office of national law firm Morgan Lewis & Bockius.


"If I had gains, and I was not willing to go back and amend my return, I might not do anything that would trigger a loss," she said. "But you should just be reporting it correctly so you're not playing audit lottery."


The IRS has made it clear over the last few years that bitcoin and the other 1,500-plus digital assets are on its radar. Earlier this year, the agency released a notice to remind taxpayers that crypto transactions come with tax implications.


Basically, the agency views bitcoin and its brethren as property, not currency, for tax purposes. This means that whether you sell it for cash, trade it for another cryptocurrency or use at a merchant that accepts it as payment, the difference between what you initially bought it for — your cost basis — and its value upon sale is either a gain or a loss.


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