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The IRS is warning cryptocurrency holders that they must report their earnings and payments on their annual tax forms. Otherwise, they may face criminal charges, such as tax evasion, which could result in a five-year prison sentence and $250,000 fine.
"A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property," the agency said. Notably, the release once again explains that the IRS classifies cryptocurrencies as property. "Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest."
"A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property," the agency said. Notably, the release once again explains that the IRS classifies cryptocurrencies as property. "Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest."