It is been a few months since the news about Bitcoin taxes broke the internet. The United States’ tax collecting body (IRS) sent over 10,000 letters to people who trade Bitcoin to alert them about the new policy. According to the IRS, Bitcoin is not just free secured money, but also an asset to be declared to the authorities.
What is the relationship between the IRS and Bitcoin taxes?
The IRS treats digital currencies the same way it treats stocks. In which cryptocurrency and stocks are under the same categories as properties. This means that when you buy cryptocurrency, you also have to pay long-term capital gains when you sell (if you hold for more than a year). If you buy and sell crypto regularly, no matter if long-term or short-term investment, the IRS sees it as if it is like your income and so taxed using the same logic. However, the situation might be a bit more complex. Which is why we recommend you visit Bitcoin Tax for more detailed insights. However, holding onto your crypto for the long run will make the tax situation easier to manage. Also, you will be able to pay lower taxes if you keep your coin longer than one year. Either way, you will be taxed every time you sell your Bitcoin.
Are you one of the 10,000 people the IRS contacted?
The names remained anonymous and the IRS seems like they do not want to make them public. All we know is that in March last year, the cryptocurrency exchange Coinbase had to hand over some of their records to the IRS under federal order. The requirement from the IRS was to know who has traded more than 20,000 USD in cryptocurrency. This means that most of the people who had received the letter traded more than 20,000 USD. What we should all remember is that Bitcoin is not free hidden money when buying cryptocurrency, but also it is not free hidden money when it is earned. This means that if your employer pays you in cryptocurrency, then they will declare your income to the authorities. So also, the employee should declare it too. No matter where the IRS gets its information from, the traders should declare.
Are cryptocurrency taxes only in the USA?
The answer is no, every country has a different position about cryptocurrency. However, each country is following the same rule as, if you buy Bitcoin, you will most likely get taxed for it. The current problem that many Bitcoin investors are facing is that the cryptocurrency law is quite new. This means the majority of the law regarding cryptocurrency has not been sorted out yet. So, it can happen that it is easier to breach law for the sole point of not being aware of it.
In conclusion, after trading on Phemex, remember to submit your taxes and consult the Bitcoin Tax website for any information.
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