IRS Launches Crackdown To Ensure Crypto Investors Pay Their Taxes

If you buy a Tesla, you will owe an additional tax on the transfer on top of any sales taxes you pay. These rules make bitcoin difficult to use for payments, something that regulators no doubt intended.

Lot identification

Investors who bought the same coin at different prices can often minimize taxes by selling the lot that would give them the smallest tax exposure. For example, say that someone sold bitcoins at $22,000 each in December 2020 and had coins bought in 2016 for $600 and 2017 for $16,000. Selling the 2016 coins would mean a taxable gain of $21,400 each, while selling the 2017 coins would mean a gain of $6,000 each—a big difference.

Offshore holdings 

In late 2020, the Financial Crimes Enforcement Network, a Treasury Department unit known as FinCEN, announced that it may soon require US taxpayers holding more than $10,000 of cryptocurrencies offshore to file FinCEN Form 114, known as the FBAR, to report these holdings. But this rule has yet to be adopted, and wasn't in effect for 2020.

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Comments

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William K. 2 months ago Member's comment

I did not realize that bitcoins were property and not currency. Interesting indeed. Perhaps this fad WILL pas. I hope.

Anne Davis 2 months ago Member's comment

I don't have a problem with this. If you make money of it, why not pay taxes on the profit?