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Reporting bitcoin income on taxes

On Behalf of | Jan 30, 2018 | Income Taxes

Georgians who have invested in bitcoin should be aware that they must report any income that they made from selling or trading cryptocurrency on their income tax returns. Some people have the mistaken idea that digital currency is beyond the reach of the Internal Revenue Service, but it is not.

The IRS wants people to report bitcoin income just like they have to report all other types of earned income. Therefore, people who made money selling digital currency in 2017 must declare it. The Internal Revenue Service views digital currency as a type of capital gain. If a taxpayer sells it after holding it for longer than a year, they will pay the long-term capital gains rate of around 20 percent. If they held it for a shorter period before selling it, they will pay the normal income tax rate.

People who suffered losses on their bitcoin sales can offset their income or other capital gains by up to $3,000. Losses can also be carried forward to next year. People can use Form 8949 to tally their bitcoin losses and gains and then report them on Schedule D of their tax returns.

It is important for Georgians to report all of their income, regardless of its source, to the IRS. People who fail to report their income may be subjected to audits and penalties. A tax attorney may assist clients with their individual or business income tax returns. If a taxpayer receives a notice of audit, the attorney could provide representation. Attorneys may be able to negotiate tax debt relief if a client owes more in taxes than he or she is able to pay.