Crypto Reporting Guide
What is Cryptocurrency?
Cryptocurrency is a form of digital asset. It is similar to cash, such as US Dollars ($), but exclusively digital so there are no physical bills or coins. There are specific risks associated with cryptocurrency which are different from traditional currency: individual cryptocurrencies are entirely based in an electronic (on-line) medium, and are not managed, backed or controlled by any governmental agency or international body.
The US taxes cryptocurrency as property. Therefore, if your cryptocurrency holdings appreciate (increase) in value any decision to sell part or all of your portfolio, trades or use (such as for a hard goods or services purchase) may be taxed as a capital gain. Likewise, if your cryptocurrency portfolio depreciates (decrease) in value and you make transactions from your digital account you can accumulate losses which can be used to reduce your taxable exposure or offset other capital gains.
The IRS and international tax agencies use a variety of techniques to track cryptocurrency transactions and
enforce tax compliance. For example, there is a simple question toward the top of every taxpayers 1040,
1040-SR and 1040-NR: “At any time during 2021 (2022, etc), did you receive, sell, exchange, or otherwise dispose
of any financial interest in any virtual currency?”
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