|New on your 2019 filings, taxpayers will now be required to disclose on their income tax returns whether they received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency during the tax year.
The IRS is aware that some taxpayers with virtual currency transactions have failed to report virtual currency income, or have not been reporting their transactions properly in previous years. As a result, the Service is actively pursuing non-compliance in this area beyond examinations by requiring annual disclosure on your individual income tax returns.
Taxpayers who did not report transactions involving virtual currency or who reported them incorrectly may, when appropriate, be subject to additional income tax, penalties and interest. In some cases, taxpayers could be subject to criminal prosecution.
Due to the complexities and uniqueness of this industry, the IRS only recently released guidance regarding the taxation of cryptocurrency transactions in the form of Revenue Procedure 2019-24 and a set of frequently asked questions on the IRS website. If you have invested or plan to invest in cryptocurrency and/or related assets, we encourage you to contact our office to discuss the challenges in accounting for this activity and the related income tax implications.