As the use of Virtual Currency increases, the IRS has signaled that they are beginning to step up their enforcement of tax on these transactions. In March of 2021, the IRS launched “Operation Hidden Treasure” to help track down taxpayers who are making virtual currency transactions. Any taxpayer who fails to report these virtual currency transactions, or report them incorrectly, could be subject to civil or criminal penalties. It is crucial for taxpayers who make virtual currency transactions to keep records so that these transactions can be reported accurately on their returns. These records include sales, exchanges, documenting receipts, or any dispositions.
Transactions Involving Virtual Currency Include:
A sale of a virtual currency
An exchange of virtual currency for a good or service
An exchange involving virtual currency for other property, including other virtual currency
Receipt or transfer of virtual currency for free
For further information regarding the tax implications on the sale of virtual currency, please contact one of the tax professionals at Bormel, Grice & Huyett, P.A. 410-792-7259.