Virtual currency is a digital representation of value, other than a representation of the U.S. dollar or a foreign currency (“real currency”), that functions as a unit of account, a store of value, and a medium of exchange.
What counts as virtual currency for taxes?
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. 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.
Do you have to report Bitcoin to IRS?
Yes, your Bitcoin is taxable. The IRS considers cryptocurrency holdings to be “property” for tax purposes, which means your virtual currency is taxed in the same way as any other assets you own, like stocks or gold.
Why is the IRS sending letters to virtual currency owners?
WASHINGTON — The Internal Revenue Service has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.
What does 6174-a, notice from IRS to cryptocurrency traders?
As in Letter 6174, this letter tells you that there is a potential misreporting of virtual currency transactions. However, this notice states that the IRS may follow-up with future enforcement action. Again, no response is required if the taxpayer believes that they are in compliance.
When does the IRS start sending out letters?
IR-2019-132, July 26, 2019 — The IRS has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.
Do you need to respond to IRS letter 6174-a?
IRS Letter 6174-A specifically says that no response is necessary if you already reported your cryptocurrency income. So, don’t stress about calling the IRS or replying to the letter to tell them your tax return is already correct.
