On Friday November 5th, 2021, the House passed the Bipartisan Infrastructure bill and the major tax provision deals with virtual currency and cryptocurrency. Now, virtual currency will fall under the same reporting requirements that are common for stocks. Americans could receive a reporting form, such as a 1099-B, for their virtual currency transactions.
What To Know?
Virtual currency transactions are taxable. The IRS has cracked down on people with virtual currency transactions and have issued several John Doe summons to institutions to find people with virtual currency. They have also issued letters to people they believe have taxable virtual currency transactions but have not properly reported them.
How is Virtual/Crypto Currency taxed?
Virtual currency is taxed as if it were property. Meaning any time virtual currency is exchanged, it creates a taxable transaction. For example, in 2010, a person exchanged 10,000 BitCoin for 2 Papa Johns Pizzas. (10,000 BitCoins are no worth $605 million and yes, this is a true story). In exchanging the BitCoin for pizza, the taxpayer had a taxable transaction even though they did not receive cash back.
What To Do Now?
If you’re unsure about the taxation on your virtual currency, speak with your local YHB advisor! We have a team that specializes in these transactions and can help walk you through the most complex of issues.
Stay tuned for our webinar on December 10th which will go in more detail on virtual currency transactions!