6. Engaging in Virtual Currency Transactions

Those who are selling, receiving, or trading cryptocurrencies are constantly in the IRS’ crosshairs. To stop and prevent unreported virtual currency income, its agents are mailing letters to individuals they suspect have cryptocurrency accounts.

Also, the IRS turned to the federal court to obtain a list of customers’ names of Coinbase, a cryptocurrency trading platform. On top of that, the IRS has established teams of revenue agents to deal with virtual currency-related audits.

But that’s not all. All single filers must state on the first page of their Form 1040 whether they have sold, exchanged, or received any financial interest in cryptocurrency.

Basically, bitcoin and other virtual currencies are classified as property for US tax purposes. The IRS has a list of commonly asked questions that cover topics such as trading, selling and receiving virtual currency, figuring gain or loss, gifting or donating cryptocurrency, and so on.