Don’t make this mistake with cryptocurrency

ROCHESTER, N.Y. (WROC) — Garrett Wagner from the New York State Society of CPAs said people who are trading cryptocurrency need to make sure they are reporting gains and losses on their income tax return.

“A cryptocurrency is just a new form of digital currency,” said Wagner. “It was created with something called blockchain technology and the goal when it first got started way back in 2008 was to take currency away from the government and financial institutions.”

The Internal Revenue Service is cracking down to make sure people are properly reporting any income or loss tied to cryptocurrency. “If you’ve bought any cryptocurrency in the past couple of years that’s okay — it’s selling it,” Wagner said.

“When you sell cryptocurrency, it doesn’t matter what kind, that’s when it triggers a taxable gain or loss. And the most important thing to keep this really simple for everybody is if you sold cryptocurrency in 2021, tell your accountant, tax person, or CPA. Let them figure out the nuances. Your job is to tell them you sold cryptocurrency.”

Wagner said this applies to NFTs (Non-fungible tokens). “Just like any other income you have — whether it’s a W2, or self-employment, or investment income — if you don’t report it the IRS is eventually going to catch up to you. You’ll get penalized — interest for late payments. It doesn’t work out well for you. The IRS is always going to catch you so just file your taxes now. Report that income today and save yourself a lot of trouble.”

Wagner added the IRS is already experiencing a backlog of tax returns so make sure you file your income tax return as soon as possible to avoid any delays to your refund.