Bitcoins Used to Pay for Products are Taxable Income, Wages Paid in Virtual Currency are Subject to Witholding, Turbo Tax Explains

Gary Guthrie from ConsumerAffairs notes that the July 15, 2020 tax-filing deadline for US taxpayers is approaching, and the Internal Revenue Service (IRS) plans to ensure that US residents have the appropriate tools and services to assist them with filing taxes and meeting their obligations.

The IRS offers tax assistance 24/7 online at IRS.gov. The helpline may be used to inquire about how to make a payment or learn more about being approved for an extension.

According to a review performed by the ConsumerAffairs team, the Interactive Tax Assistant tool, offered by the IRS, helps answer many important tax-related questions. For instance, taxpayers who had to deal with unexpected health-related costs during the Coronavirus crisis will be able to get the answers they need by simply typing in “health” in the tax assistant tool’s search bar.

The IRS also assists US taxpayers by helping them connect with tax professionals, tax lawyers, certified public accountants, and other specialists.

The IRS has also reminded people who may have received stock dividends, or made capital gains from virtual currencies like Bitcoin (BTC) to make sure that they are accurately reporting taxes.

Last year, Turbo Tax published a detailed blog post in which it attempted to explain how to file taxes on Bitcoin (BTC) transactions.

The IRS has also addressed questions regarding virtual currency transactions in its Revenue Rule 2019-2024 and in an FAQ article.

As explained by the Turbo Tax team:

“Bitcoins used to pay for goods and services [are] taxed as income. If you are an employer paying with Bitcoin, you must report employee earnings to the IRS on W-2 forms. You must convert the Bitcoin value to US dollars as of the date each payment is made and keep careful records.”

Turbo Tax clarifies:

“Wages paid in virtual currency are subject to withholding to the same extent as dollar wages. Employees must report their total W-2 wages in dollars, even if earned as Bitcoin. Self-employed individuals with Bitcoin gains or losses from sales transactions also must convert the virtual currency to dollars as of the day received, and report the figures on their tax returns.”

The IRS recently won a case in which it had instructed a couple residing in Maryland to liquidate their Bitcoin holdings in order to pay $1.1 million in owed taxes.

Alexander and Laura Strashny had requested the IRS to pay off their 2017 taxes, acquired from non-cryptocurrency transactions, in installments spanning a 6-year timeframe.

However, the IRS rejected the couple’s suggestion and told them to sell a portion of their $7 million in cryptocurrency holdings, in order to settle their tax obligations as soon as possible.

Sponsored Links by DQ Promote


 

You may also like...

Send this to a friend