Cryptocurrency has become an incredibly popular way to invest, but the tax side of this virtual coin can be difficult to navigate. The IRS has gone back and forth over the years on it’s stance on cryptocurrency, making it confusing even for the most diligent investors.
In March of 2021, the IRS announced Operation Hidden Treasure in order to crack down on cryptocurrency reporting. If you’ve bought and/or sold cryptocurrency recently, it’s important to declare your crypto correctly on your tax forms in order to avoid fraud and evasion charges.
Here’s what you need to know.
Before we jump into it, if you know you owe IRS back taxes on your crypto gains, it’s important to reach out to a tax resolution firm like ours that is skilled in negotiating back tax debt with the IRS. We can help you file amended returns and get you back in compliance, while potentially negotiating with the IRS on your behalf. Contact us today for a consultation. https://calendly.com/premiersmlbus/consult
What Is Operation Hidden Treasure?
Operation Hidden Treasure is a joint effort by the IRS Civil Office of Fraud Enforcement and its Criminal Investigation Unit. This operation is designed to search for unreported income from cryptocurrency.
Operation Hidden Treasure has trained agents to examine the blockchain in order to find signs of tax evasion. Blockchain is the digital ledger that tracks your cryptocurrency mining and transactions. The signs that IRS agents look for are marked as signatures that make it easier to detect further fraudulent activity.
Crypto users have found ways to skirt reporting requirements by sending multiple transactions under a certain dollar amount or pouring their virtual currency into shell corporations, different countries, and cold storage. The IRS is also collaborating with European law enforcement agencies to tackle international fraud.
How To Protect Your Assets
The IRS considers virtual currency to be property akin to gold, rather than money and is taxed accordingly. If your only crypto transaction this year was purchasing crypto with US dollars, then that does not need to be reported, according to the IRS FAQ on their website. However, if you sold your crypto or you traded your crypto for any goods or services, then that does need to be reported.
When you sell your crypto, keep track of its value when you purchased it, and its value when you sold it. While crypto and the IRS can both be murky subjects, your transparency is the key to protecting your financial assets from future tax audits.
To get ready for the upcoming tax season, it’s important to get your portfolio organized. If you have bought, sold, or traded crypto in the past year, contact a tax lawyer or a tax resolution firm like ours for advice on how to report your cryptocurrency transactions.
Need Tax Relief?
If you do get in trouble with the IRS and they claim you owe $10,000 or more, reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation to explain your options in full to permanently resolve your tax problem. https://calendly.com/premiersmlbus/consult
It is one of the scariest things that can befall a taxpayer – the dreaded notice from the IRS stating you owe them more money you can’t pay. When you open up the mailbox and see the return address of the tax agency staring back at you, your heart is bound to skip a beat (or two).
Few people look forward to communicating with the IRS, but plenty of taxpayers receive these notices every year. If you do find yourself on the receiving end of such a notice, knowing what to do next could make all the difference, and possibly save your bank account. Here are seven critical steps to take if the IRS disagrees with the income (or expense) figures you have reported.
Note: If you fall behind on filing your taxes, you’re not alone and we can help. Reach out to our tax resolution firm and we’ll help you file late tax returns and negotiate with the IRS if you owe back taxes. https://calendly.com/premiersmlbus/consult
If you do need to contact the IRS, keep in mind that their phone lines are extremely busy. Many people who have been through this trauma recommend calling early in the morning, right after the phone lines open, so you can get in line and get your questions answer before the lines fill up.
We NEVER suggest our clients try to contact the IRS on their own. It would be like going to court without a lawyer. The IRS is not your friend, they’re sole responsibility in these cases is to collect taxes they think they’re owed.
Hopefully you will never be on the receiving end of a nasty letter from the IRS but it is still important to be prepared. If you do find a letter from the IRS in your mailbox, following the seven critical steps listed above could save you from further trouble.
Reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation to explain your options in full to permanently resolve your tax problem. https://calendly.com/premiersmlbus/consult
Whether you are expecting a nice tax refund or preparing to write a big scary check, you know that April 15 is the annual tax filing deadline. What you may not know, however, is that tax day is every day at the IRS, and the tax agency is always reviewing the information taxpayers and business owners have provided.
That means that keeping tax records is about more than just smart bookkeeping – it is an integral form of self protection. You see, millions of Americans get letters from the IRS stating they owe back taxes or requesting more information about their tax returns.
It may be disconcerting, but the IRS has the right to request additional information months, or even years, after the return you filed has supposedly been processed and accepted. In fact, the much feared tax agency can request additional documentation for up to three years after the annual tax deadline has come and gone.
We help people resolve their back tax problems and often settle with the IRS for less than the amount they owe, but in order to do this, we need to provide the right records. Thats where having your tax records saved can be the difference between settling your tax debt or not.
As a result, it is important to retain your tax records and keep certain tax documents on hand, just in case the IRS asks for them. Here are the most common tax records and how long you should keep them around.
If you owe back taxes, our firm can help negotiate with the IRS and potentially settle your tax debt. Call us today. Our tax resolution specialists can navigate the IRS maze so that you have nothing to worry about. [https://calendly.com/premiersmlbus/consult]
In most cases the IRS will have up to three years to question the figures you reported on your tax return, or otherwise challenge the information you provided. You may think the tax year is over, but for the IRS the final curtain does not fall for a full 36 months.
For this reason, it is generally a good idea to keep your old tax returns for a minimum of three years. You do not necessarily have to print and retain hard copies of your tax returns – electronic documents are fine as long as you will be able to access them quickly should you need them.
If you fail to keep copies of your tax returns, you can still access them by asking the IRS for transcripts. It is best to keep your own records, and doing so will make your life a lot easier.
As with the tax returns themselves, it is generally a good idea to keep your W2 forms for a minimum of three years. This will provide you with the documentation you need should the IRS find a discrepancy between the amount of income you reported to the agency and the figures your employer provided.
It is also a good idea to retain at least your year-end pay stubs, not only to help reconcile them with the W2 forms but also for other forms of income documentation. If you are applying for a mortgage, for instance, the lender may ask to see several years worth of tax returns, pay stubs and other income documents, and having them on hand will make the application process faster and easier.
The IRS looks at all of the income you report when you complete and submit your tax returns, but the agency does not just take your word for the accuracy of those figures. Instead the IRS uses sophisticated matching programs to compare the amount of income you reported from various sources with what they receive from third party sources.
Those third party sources could include your bank and credit union, your brokerage firms and mutual fund companies and any other places that provide you with income. It is therefore a good idea to hold onto any income related forms you receive for at least three years, and possibly longer if you run your own business or earn income from gig work or freelancing.
Once again, these income documents can do double duty, serving as backup if the IRS questions the numbers on your tax return but also giving you the information lenders and others might need down the road. If you store these documents electronically you will not even need to worry about buying a file cabinet, so there is really no reason to not keep them around.
Filing taxes can be a stressful experience, but the difficulty does not end when you click send on your e-filed tax return. Even after that return has been filed and accepted, the IRS could still question or challenge your numbers, and that is why it is so important to retain the backup documentation until the challenge window has passed. Now that you know what to retain and for how long, you can rest a little easier when tax time rolls around.
If you do run into tax trouble or the IRS states you owe back taxes, reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation to explain your options in full to permanently resolve your tax problem. [https://calendly.com/premiersmlbus/consult]