Virtual currency has gained more and more popularity over the last few years, and people have started to wonder how bitcoin and other virtual currencies will affect tax preparation. If you’re someone who has some virtual currency, it’s time to turn to an expert for tax services and work with them to figure out the impact it will have on your taxes this year. SmarTax, LLC. in Pembroke Pines has a team of professionals that can sit with you to help you figure out what virtual currency means for you and your taxes. Keep reading to find out more information on the topic!
Handling Tax Services and Virtual Currency
Tax preparation is one of the most stressful situations to deal with, and when you have an out of the ordinary currency like bitcoin, things can get a little more complex. Of all virtual currency, Bitcoin is the most popular one as of 2019. This type of virtual currency is considered convertible since Bitcoin has a real currency value. If Bitcoin is used for sales or exchanges, than it is considered to be taxable. However, there are many questions surrounding the treatment of virtual money when it comes to taxes. The truth is that the tax treatment of this “money” depends on how you receive it and hold onto it.
There are some employers that pay their employees in Bitcoin, and there are even a few retail stores that will accept Bitcoin as a form of payment. Other companies hold virtual currency as a capital asset. This means that the Internal Revenue Service or IRS had to find a way to include and classify these virtual transactions as taxes. –
- Bitcoin used for goods and services: E-currency that is used to pay for goods or services is taxed as income. If you are an employee, who gets paid in Bitcoin, than you need to report the earnings on a W-2 form. You’ll have to convert the value of your Bitcoin to U.S dollars and record the date each payment is received.
- Bitcoin held as an asset: If you are holding the virtual currency as a capital asset, than the IRS requires you report and treat them as property when filing taxes.
- Bitcoin mines report currency as income: If you are someone who “mines” Bitcoin using a computer, you need to record this “money” as income. It doesn’t matter if the income received is virtual or actual paper currency is it reported the same way. The amount needs to be included in the gross income section of your taxes after you convert and figure out what the fair market value is for your virtual currency. Also, another important factor to consider is if you are “mining” Bitcoin and are “self-employed,” your gross earnings without your tax deductions are subject to the IRS self-employment tax as well.
Contact Us For Tax Services
SmarTax LLC provides tax preparation in the Pembroke Pines area. We assist our clients with all of their tax needs to make sure they meet all their deadlines and requirements. Call or visit us today to find out about our tax preparation services and how we can help you!!