Tax Tips: Virtual Currency

March 20, 2020

Virtual Currency should be handled with care.

Recently, the IRS has been sending letters to taxpayers it believes owns virtual currency, such as Bitcoin, urging them to review past tax returns and, in some cases, affirm their accuracy under penalty of perjury. This puts taxpayers in a difficult position, because there are several unresolved issues regarding taxation of virtual currencies that the IRS has yet to address. As of this writing, the only IRS guidance is a five-year-old notice clarifying that virtual currency is “property” for federal tax purposes and, therefore, may generate capital gains taxes when exchanged for other property. If you own virtual currency, consult your tax advisor to ensure that you’re properly reporting it and to review your prior-year tax returns, amending them if appropriate.

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This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.

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