The IRS warns taxpayers to include crypto on their tax returns, failure to do so results in “penalties and interest.”
The US Internal Revenue Service (IRS) released a memo March 23, reminding US citizens of the need to report their digital currency earnings on their income tax returns.
The IRS notes that Notice 2014-21 defines digital currencies as property, and they are thus subject to federal property taxes. Those who fail to report their crypto earnings can be “liable for penalties and interest,” and “in more extreme situations […] criminal prosecution.”
The recent memo highlights the “inherently pseudo-anonymous aspect” of cryptocurrency transactions, which the organization believes may lead some taxpayers to be “tempted to hide taxable income from the IRS.”
In 2017, only .04 percent of customers of personal finance service Credit Karma reported crypto transactions on their tax returns.