Crypto Tax Audit in Westlake Village

In addition to “Operation Hidden Treasure”, the IRS demonstrated its increased focus on cryptocurrency transactions when it announced in year 2020 that it was hiring experts in cryptocurrency as independent contractors to assist with crypto tax audits.

Taxpayers also need to answer the question – “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” – on their year 2020 tax returns.

Believing that many taxpayers are not correctly reporting cryptocurrency income for tax purposes, the IRS is commencing crypto tax audits in the Westlake Village area.

The IRS characterizes cryptocurrency as property, similar to stock.  If you buy cryptocurrency for $50 and sell it for $70, the $20 gain is cryptocurrency income.

Cryptocurrency income also can occur in other forms.

Cryptocurrency income can occur when you reside or do business in Westlake Village and receive payment for goods or services in cryptocurrency.  The receipt of payment in cryptocurrency is treated similar to the receipt of cash for tax purposes.  When received as payment for goods, the cryptocurrency is income if it exceeds your tax basis in the goods.  When received as payment for services, the cryptocurrency is fully income as compensation.

Cryptocurrency income can occur when you reside or do business in Westlake Village and receive cryptocurrency for working on the blockchain ledger (a cryptocurrency “mining” transaction).

Cryptocurrency income can occur when you reside or do business in Westlake Village and receive cryptocurrency from a company for its marketing or promotional purposes (a cryptocurrency “air drop” transaction).

In any form, cryptocurrency income is taxable income and needs to be included on your tax return.

If you are targeted in “Operation Hidden Treasure” or otherwise for a crypto tax audit in the Westlake Village area, you need to retain representation by tax professionals who can best represent you in your crypto tax audit.  You need representation by Leading Tax Group.

When you are represented by Leading Tax Group, you can take advantage of two key points that can lead to success in a crypto tax audit in the Westlake Village area.  First, Leading Tax Group has significant experience from working on other tax audits of Westlake Village taxpayers to know how to deal with the IRS.  Second, Leading Tax Group has significant knowledge about cryptocurrency to understand the specifics of cryptocurrency transactions.