The Internal Revenue Service (“IRS”) is pushing to get more information on taxpayers who engage in cryptocurrency transactions, including on such taxpayers in Ventura, California.
In 2018, the IRS won litigation against the cryptocurrency exchange, Coinbase, using John Doe summonses to obtain access to customer information.
Earlier this year, the IRS won a court case authorizing it to serve a John Doe summons on the cryptocurrency exchange, Kraken, and its owner, Payward Ventures.
The IRS is pursuing these cases because people are displaying an increased interest in cryptocurrency. Because of this increased interest in cryptocurrency, the IRS wants to examine more closely how taxpayers are treating their cryptocurrency transactions on their tax returns. With the IRS looking into cryptocurrency transactions, Ventura taxpayers who participate in cryptocurrency transactions face a greater risk of a tax audit (a “crypto tax audit”).
In addition to the above-described litigation and court cases, the increased attention of the IRS on cryptocurrency transactions has been evident in various ways.
Earlier this year, “Operation Hidden Treasure” was announced by the IRS. “Operation Hidden Treasure” consists of a dedicated team of IRS criminal investigation and fraud enforcement persons to review unreported cryptocurrency income cases.
In addition, earlier this year, the IRS entered into a one-year contract with the cryptocurrency tax service provider,TaxBit, to help the IRS with crypto tax audits.
Moreover, taxpayers must respond to the question, “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”, on the first page of their year 2020 tax returns.
Based on its belief that many taxpayers are not correctly reporting the cryptocurrency income from their cryptocurrency transactions for tax purposes, the IRS is starting crypto tax audits in the Ventura area.
You can realize cryptocurrency income in many different manners.
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First, if you purchase cryptocurrency as an investment and sell it for a profit, such profit is cryptocurrency income.
Second, if you receive cryptocurrency from a “mining” transaction (i.e., you receive cryptocurrency for doing work on the blockchain ledger), such receipt of cryptocurrency is cryptocurrency income.
Third, if you receive cryptocurrency from an “airdrop” transaction (i.e., you receive cryptocurrency from a company for its promotional or marketing purposes), such receipt of cryptocurrency is cryptocurrency income.
Fourth, if you receive cryptocurrency as payment for goods or services, such receipt of cryptocurrency can be cryptocurrency income. If received as payment for goods, the cryptocurrency is cryptocurrency income if it exceeds your tax basis in the goods; if received as payment for services, the cryptocurrency is fully cryptocurrency income as compensation.
The IRS will treat cryptocurrency income, regardless of the specific form that it takes, as taxable income, which must be included on your tax return.
If you are the target of a crypto tax audit in the Ventura area, you need to retain the services of qualified tax professionals who can effectively represent you in your crypto tax audit. You need to retain the services of Leading Tax Group.
When you are represented by Leading Tax Group in your crypto tax audit, you will get the benefit of both Leading Tax Group’s extensive knowledge of the intricacies of cryptocurrency and Leading Tax Group’s significant experience in representing other Ventura taxpayers in their tax audits before the IRS.
To assist its Ventura clients, Leading Tax Group has an office in Ventura at 1500 Palma Drive.
If you are facing a crypto tax audit, and live in the Ventura area, you need the aggressive and experienced tax representation of Leading Tax Group. Contact Leading Tax Group now!
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