CRYPTOCURRENCY AND THE IMPORTANCE OF COMPLIANCE
Crypto investors don’t expect tax ramifications because it is outside of the traditional infrastructure of money. The IRS requires cryptocurrency investors to disclose yearly activity. Beyond checking the box near the top of the tax form, there are reporting requirements that most taxpayers don’t understand, so they fail to properly report them. As a result, crypto investors may face higher taxes as new legislation cracks down on unreported transactions. The infrastructure bill passed in 2021 calls for reporting of digital transactions beginning in 2023 by currency brokers, which is expecting to bring in nearly $28 billion in additional tax over a decade.
While simply purchasing digital currency won’t prompt a tax bill, other activities may, including: hard forks, converting it to cash, using it for purchases, accepting it for payment and more.
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