A lot of speculations fly around cryptocurrency taxing. The technology is advancing, while most of the governments aren't yet taking a clear stance on its legalization and taxation. But the US government has introduced some amendments regarding the taxation of cryptocurrency for traders. The first step is to fill all the trading details. A bunch of tax calculation tools is also available in the market for this purpose. But the taxpayers are not able to use these tools effectively as most of the citizens don’t know about taxation on crypto tokens which are stored on foreign lands. Also, half of the American cryptocurrency traders use non-US exchanges for both Bitcoin and altcoins.
As per the regulations, the Federal Bodies of US which consist of US Treasury and Internal Revenue Service (IRS) expects that the citizens disclose information about their economic status and money held in foreign lands. And failing to report this can invite fines as well as a potential jail sentence. But most of the crypto users don’t understand this issue. The crypto users who began their trading activity in 2017, don’t seem to know about this fulfillment at all. This mysterious rule will possibly have undesired consequences. Report of FBAR viz. Foreign Bank and Financial Accounts also expects disclosure of cryptocurrency foreign holdings that are worth more than $10,000.
Furthermore, Form 8983 should be used to disclose all foreign holdings. But people tend to overlook such matters due to lack of awareness. Also, IRS now categorizes cryptocurrencies as ‘property.’ The taxpayers should consider crypto gains as a capital gain and pay the taxes as per the applicable rates. The same applies to foreign trading platforms as well, which spawns additional confusion. One of the most significant issues is how investors who trade cryptocurrency using international wallets or exchanges would be affected.
Currently, tax accountants themselves are bewildered as to whether FBAR is required at all or not. Although it is not mandatory now, US regulatory body will need to clear this mystery asap. It is irrational to expect at their end that citizens research cryptocurrencies tax all by their own.
It is surely going to be amusing to watch how the taxpayers in the US comprehend the whole ‘crypto taxing’ scenario as IRS has miserably failed to convey critical information. FBAR considers foreign exchanges as a reportable account. It is the right time to reach tax professionals and discuss the matter to file the required documents before the last date of paying tax. After all, this looks the only way to prevent any future complications.