What happens if you don’t report cryptocurrency on taxes ?
Individuals who buy, sell, or trade cryptocurrency should keep a record of that activity and report it to the IRS. That is because cryptocurrencies are property and they fall under capital gains tax rates. Different types of transactions will have different tax consequences. For example, cryptocurrency-to-cryptocurrency trades such as Bitcoin to Litecoin are more often like trading one property for another (like an old house for a new house), which means that you’ll owe capital gains tax on any net profit you make from the sale via form 8949 and Schedule D in addition to reporting it on your 1040.
On the other hand, buying cryptocurrency with cash will likely be treated as a barter transaction, which means that you don’t have to pay any tax until you sell the property for cash (in other words, when you “cash out”).
It’s also a good idea to report bad debt losses that occur when your cryptocurrency is stolen or lost. Finally, if you received virtual currency as payment for goods or services rendered, then there are some additional reporting requirements. But in general, if you buy and hold crypto long-term, then you should report your capital gain or loss on schedule D of form 1040 and pay no tax until you sell it and if you hold your crypto long-term then there are various types of crypto tax software to maintain the record of your all coins and taxes which makes your work more easy.
If you’re still reading, then you may be interested to know about the tax implications of crypto mining. Mining is treated as a trade or business, so if you’re in it for profit, then it will be taxed under self-employment tax rules. However, if you mine cryptocurrency simply to acquire it and hold it long-term or give to charity, then those activities are not taxable.
Is it illegal to not pay taxes on crypto ?
There’s no legal obligation to pay taxes on crypto, but there are other monetary implications you’ll need to consider. You may be required by law to declare your earnings when using crypto for transactions such as trading, paying for goods and services, or donations. This is because the IRS considers crypto a form of property, which means any proceeds from its sale is subject to capital gains tax – dead or alive! Phew! Looks like it’s not illegal not to pay crypto tax in India or in other countries after all.
But we recommend that you consult with a CPA before taking any financial decisions involving your tradable assets in the meantime.
There are plenty of pro’s when it comes to paying for things with crypto. It offers you complete anonymity – some would say more than cash transactions would permit. You also don’t need to go through the hassles of conversion with fiat funds if you’d like to purchase something in another nation’s currency while travelling abroad. Transactions are fast, transparent, low-cost and devoid of any third-party interference.
Protecting your crypto against theft is super easy too! Just make sure that your private keys are kept safe and secure at all times.
But apart from this if you have any doubt or you want to consult with anyone, then i will suggest you to visit Binocs. Binocs is a crypto tax software which works in this field and it definitely helps you a lot.