Tax laws

Tax Laws That Might Surprise You

TUCSON, Ariz. (KGUN) — If you love cryptocurrency, you need to be extra careful about paying your taxes on it, because if you don’t pay, it can end up costing you a lot of money.

Riana Linsky, Senior Manager at Dark Horse CPA in Tucson, says the topic of cryptocurrency is growing and rumors that there is no need to pay taxes on the currency are incorrect.

“There are a lot of misconceptions out there right now. The IRS declared its position on cryptocurrency in 2014. The general tax principles that apply to real estate transactions such as stocks and bonds also apply to cryptocurrency,” Linsky said.

For years, cryptocurrency income reporting was based on an honor system, but that guideline is about to change.

“The big hot topic is the cryptocurrency report where a lot of people may have been flying under the radar for a number of years and it’s coming to an end,” Linsky said.

Linksy says that in the past, the IRS hasn’t been getting as many cryptocurrency revenue claims as expected.

“The infrastructure bill was signed into law on Nov. 15, cryptocurrency exchanges like Coinbase will now need to file a 1099-B at the end of January next year in order to send it to the IRS for its program correspondence,” Linsky said.

The figures reported on both sides must match and although the laws officially come into force in January 2023, beware, especially if you haven’t paid back on past cryptocurrency earnings.

Another interesting factor is the tax guidelines regarding the taxation of all illegal activities, stolen property, bribes and kickbacks. The laws are not new but very interesting and also based on the honor system.

“That’s actually what helped bring down Al Capone in 1931, he was engaged in illegal activities and he wasn’t filing his tax returns,” Linsky said.

By the way, you won’t have to pay taxes on stolen goods as long as you return them to the person you stole them from in the same year. However, you have to pay if you find anything of value on the street.

“If I come across a bag in the park and it has $5,000 in it and I do my best to find its rightful owner and can’t find it, I have to claim $5,000 in taxable income” , Linsky said.

The key is to check with your tax professional to make sure your documents are in order. To avoid this unwanted audit notice in the mail.

“The IRS and the state tax authority have a pretty deep reach. If someone is pulled for an audit, they can go back several years, which could be a black hole for some taxpayers,” said Linksy.