Internal Revenue Service of the USA (IRS) reminded taxpayers to add any income in bitcoin and other cryptocurrencies in annual declarations.
In the message published on Friday, March 22, IRS noted that cryptocurrency transactions must be declared, as well as any other types of property.
For the first time, IRS reported about the intention to tax cryptocurrencies in 2014, stated then that profits and losses on operations with digital currencies if the last were used as non-turnaround assets, would be regarded as a capital gain. Salaries, paid to employees in cryptocurrencies also are to be taxed. In the meanwhile, cryptocurrency payments in favor of independent contractors and providers of services have to be brought in the Form 1099.
In the last message, IRS explained its position, stated that cryptocurrency payments had to be displayed in tax declarations.
“The payments made by means of virtual currency are a subject of the information report in the same degree, as any other payments with the use of a property.”
— said in the document.
The department has also noted that taxpayers who didn’t declare properly tax consequences of cryptocurrency transactions could be subjected to the procedure of audit and if it was required, to bear administrative responsibility in the form of penalties. In especially “extreme situations” it can even reach the criminal responsibility for evasion from taxes which assumes up to 5 years of imprisonment and payment of a penalty of $250 000.
Also, the same penalty of $250 000 and 3 years in prison can threaten users who include obviously false data in their tax declarations.
As the department notes, “some taxpayers can test temptation to conceal the income assessed by taxes from IRS”.