It is becoming more common in Encino, California to be involved with cryptocurrency. The Internal Revenue Service (the “IRS”) has noted the increased use of cryptocurrency and, as a result, has focused more scrutiny on how Encino taxpayers are treating cryptocurrency for tax purposes. With this additional attention on cryptocurrency, Encino taxpayers who participate in cryptocurrency transactions are more likely to be the subject of a tax audit (a “crypto tax audit”).
The increased scrutiny of the IRS on cryptocurrency transactions has been evidenced in several ways.
The IRS sought in year 2020 to hire independent contractors who are experts in cryptocurrency to assist with crypto tax audits.
In year 2021, the IRS advised that it had created “Operation Hidden Treasure”, consisting of a team of IRS fraud enforcement and criminal investigation professionals to examine cases of unreported cryptocurrency income.
Taxpayers also must answer the question – “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” – on their year 2020 Form 1040 tax returns.
Because it believes that taxpayers are not properly including cryptocurrency income on their tax returns, the IRS will start crypto tax audits in the Encino area.
Cryptocurrency is characterized as a form of property by the IRS. Similar to stock, if you purchase cryptocurrency as an investment for $10 and sell it for $20, you need to include $10 of investment income on your tax return.
Such investment income is only one type of cryptocurrency income.
If you reside or do business in Encino and receive payment for goods or services in cryptocurrency, you realize cryptocurrency income. The payment in cryptocurrency is treated similar to cash for tax purposes. If received as payment for goods, the cryptocurrency is income if it exceeds your tax basis in the goods. If received as payment for services, the cryptocurrency is income as compensation.
If you reside or do business in Encino and receive cryptocurrency for working on the blockchain ledger (a cryptocurrency “mining” transaction), you realize cryptocurrency income.
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If you reside or do business in Encino and receive cryptocurrency from a company for its marketing or promotional purposes (a cryptocurrency “air drop” transaction), you realize cryptocurrency income.
Cryptocurrency income, regardless of its specific type, is taxable income and must be reported on your tax return.
If you are the subject of a crypto tax audit in the Encino area, you need to hire the services of tax professionals who can best represent you in your crypto tax audit. You need the services of Leading Tax Group.
When you have the services of Leading Tax Group on your side, you can take advantage of two essential points to be successful in a crypto tax audit in the Encino area. First, Leading Tax Group has the necessary knowledge about cryptocurrency to understand cryptocurrency issues. Second, Leading Tax Group has the necessary experience in dealing with the IRS on other tax audits of Encino taxpayers to understand how to best resolve crypto tax audits.
With its knowledge and experience, Leading Tax Group is the best choice to represent you in your crypto tax audit in the Encino area.
For your convenient access, Leading Tax Group has an office in Encino at 16133 Ventura Boulevard, # 700.
If you are facing a crypto tax audit, and live in the Encino area, you need the aggressive and experienced tax representation of Leading Tax Group. Contact Leading Tax Group now!
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