How will cryptocurrency earnings be taxed?
Geltrude & Company founder and CPA Dan Geltrude explained to “Cavuto: Coast to Coast” Thursday that if crypto earnings are considered capital gains, then they must be filed as such on a tax return.
“Every time you use, let’s say, Bitcoin, you’re actually potentially triggering a taxable transaction,” he said. “Because when you use that Bitcoin if you’re getting value greater than what you paid, what the basis was, it’s like a stock. You now have a gain and it’s taxable. So it’s got to be reported.”
According to Geltrude, the Internal Revenue Service (IRS) is “hot” on the issue. The Fraud Enforcement Office has launched Operation Hidden Treasure in search of unreported income in the form of transactional cryptocurrency.
1040 tax return forms for 2020 now question taxpayers if they have transacted in cryptocurrencies, Geltrude added, and prompt a signature under penalty of perjury.
For Americans who have been paid in cryptocurrency, Geltrude explained those transactions become a basis as would any other form of payment.
“When you got paid, it’s no different than getting paid by credit card or cash, so whatever profit you had in the transaction, you pay there,” he said.
“Now you’ve received the Bitcoin, now you have to track what your basis is as of that transaction. Because when you go to use the cryptocurrency, you are creating potentially another taxable event. It’s going to be nuts!”