Tax professionals share what you need to know about cryptocurrency
LINCOLN, Neb. (KOLN) - With tax season approaching, accountants are hearing questions ranging from cryptocurrency to stimulus money.
With the rising popularity of cryptocurrency, tax preparers said there are some things to note when filing your taxes.
Kay Maresh, assistant professor of practice in accounting at UNL, said cryptocurrency isn’t treated like regular dollar bills or cash, but like an asset.
“Sometimes people don’t realize they have to report income related to cryptocurrency,” Maresh said. “There’s actually a question on your 1040 form on the first page, right below your name, address, basic information, and asks if you’ve engaged in any transactions with cryptocurrency for the year.”
Since crypto values change constantly, people need to be aware of how much it’s worth when crypto is purchased, and when it’s spent or sold.
“It goes up and down a lot, so record keeping is going to be very important,” Maresh said.
If anyone has received crypto as a gift, they’re going to want to report it. Maresh said since it’s treated like receiving property and could result in income, to gather any records you have.
“Let’s say I bought cryptocurrency for $10, $10 in cash, and then I buy pizza a month later, so it’s worth $15,” Maresh said. “I actually have a gain, the difference between the $10 I paid for the cryptocurrency and the value I received when I dispose of it.”
Megan Brunken, president on Lintel Financial Services, said there are also other challenges this year when filing.
“The child tax credit is one thing, with the advanced child tax credits that were paid last year,” Brunken said. “One issue that we’ve been hearing about, the IRS sending a letter out to taxpayers to show the amount of credits that they received, and there are some reports that these don’t match up to what people actually received.”
Brunken said there are also new rules about payment processors.
“Payment processors, such as Venmo or Square, are required to report certain types of transactions that they paid through the processing system over $600,” Brunken said. “But it doesn’t change the type of income that is taxable. If you’re sending money to your friends on Venmo, this should not be a taxable transaction. If it’s for business or services, that type of income could be taxable.”
This year’s tax deadline is Monday, April 18. Unlike previous years, there aren’t expected to be any extensions.
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