So did you dabble in bitcoin last year?
Good for you - now make sure you let Uncle Sam know.
Not only do you have to report all your trades you have to pay tax on any gains.
Surprisingly, the IRS has been ready for this craze and created tax policy around cryptocurrencies back in 2014.
So don't blow it off.
And we get it totally fluctuates - but make sure you report it at its fair market value on the day you receive it or sell it.
Because it's considered a capital asset and should be treated as such.
So that means, if you trade it, you have to report your gains and losses on Schedule D -- Capital Gains and Losses like you would a stock trade. And then you'll be subject to appropriate capital gains tax rates.
Now if your employer happens to pay you in bitcoin, that amount will show up on your W-2 like any other wages, so you will need to report that, like your other earnings, on your Form 1040.
So it'll be subject to ordinary income rates like a regular salary. That also means your employer will owe regular employment taxes, like Social Security and Medicare, to the government on that amount.
Now, if you're self-employed and got paid in bitcoin, it will taxed just like your other self-employed income.
Now if you happen to mine bitcoin, (hat tip to you), don't forget to report the income you make from selling it and you may owe self-employment tax on that income too.
And with all these things, don't forget about your states. They have corresponding bitcoin rules too and they want their cut.
So report everything and keep good records!
Tax Day is April 17 this year, so get on it and keep tuning in for more tips and tricks to help you get through this tax season!