New IRS Rules for Virtual Currency

         After being silent about virtual currency since 2014, the Internal Revenue Service (IRS) has released a ruling, along with a document detailing how this income should be handled. This provides a good amount of clarity and highlights the responsibilities of those who invest in virtual currencies.

          In the past, these types of currency were treated as property. This meant that when they were sold at a profit, there would be a tax applied. Going forward, much more detail will be required. For example, virtual currency traders must track their investments in order to prove how much they bought, and they must document transfers between accounts to prove that they are tax-free transactions. This is just part of the IRS plan to enforce tax law on this aspect of finance. Earlier in the year, they sent around 10,000 letters to holders of virtual currencies to warn that they may be subject to penalties as a result of not paying taxes on their activities. Making these requirements known will help all involved. Now is the time to seek out a Qualified Tax Professional to help determine what your responsibilities are when documenting virtual currency transactions.

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