Although bitcoin and other cryptocurrencies are gaining popularity throughout the world, some Georgia residents who deal in crypto could be confused about how to file their taxes. Also, CPAs may not be as knowledgeable on the latest IRS rules concerning them, particularly if they don’t have many clients that deal with crypto; however, those who are literate in crypto are concerned that their clients could face IRS audits.
A recent survey conducted by Blox, a cryptocurrency accounting service, and tax software developer Sovos, indicated that those who work with crypto may not know their tax liabilities and could be ill-prepared to deal with the consequences of incorrect tax filing. Unfortunately, time is not on their side as most projections point to tougher IRS crackdowns within the coming year.
Many people like you struggle to keep accurate tax records, and even the best record-keepers may have difficulty as far as recording this new technology is concerned. The problem may become more complex if individuals or businesses work with more than one kind of cryptocurrency because not all exchanges document items uniformly. Crypto accounting services and tax preparers state that incomplete data is one of the biggest challenges.
The IRS requires taxpayers to file forms to report cryptocurrency; however, some exchanges still fail to supply a 1099-B even though the IRS requires it in conjunction with the 8949. Last year, the IRS assessed penalties to many crypto users because they had filed the 8949 without the 1099-B. Taxpayers were unaware that both forms were to be supplied together when filing their taxes because the IRS held that the 1099-B substantiated the information reported in the 8949.
If you are considering delving in cryptocurrency, you might want to speak with a professional before you get too involved in the process of trading. It may be beneficial to speak with a tax attorney before one is needed to avoid potential IRS penalties and other costly mistakes, such as overpaying taxes.