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The student news site of Milwaukee Area Technical College

MATC Times

The student news site of Milwaukee Area Technical College

MATC Times

The student news site of Milwaukee Area Technical College

MATC Times

If you’re dabbling with cryptocurrency, you need to know the tax implications

Photo courtesy of Karolina Grabowska, via Pexels.

Did you know that when you buy, sell, or trade cryptocurrency in the United States, there are tax rules to follow? Yep, just like with regular money, you’ve got to keep Uncle Sam happy by reporting your crypto transactions.

In essence, delving into cryptocurrency requires a good grasp of tax rules, especially for people in the U.S., which includes us Wisconsinites. A recent tweak in regulations has hit close to home: if you rake in $10,000 or more in crypto, you’ve got just 15 days to report it to the IRS. This change highlights how the crypto world is evolving fast, demanding our attention, even if we’re not knee-deep in digital coins ourselves.

Here’s the deal: In the U.S., tax law treats cryptocurrency more like property than cash. So, every time you use or trade crypto, it’s similar to buying or selling something valuable, and that has tax consequences. But don’t worry, if you are getting into crypto, understanding the basics and knowing what to report can help you stay on the right side of the taxman.

Some of you may know Bitcoin, some of you may not. Either way, it is an important representation of how many cryptocurrencies operate, so here’s a rundown: Bitcoin is like digital money that doesn’t need a bank. It runs on a system called blockchain, which is like a public record book. Instead of being printed, new Bitcoins are “mined” by computers solving puzzles. Every transaction is recorded openly on the blockchain, so everyone can see. And you can send Bitcoin directly to someone else without involving a bank. However, it is important to note that not all cryptocurrencies work this way, and that different cryptocurrencies may have different parameters or qualities.

Interestingly enough, crypto is not really an age-based business, as even teens have jumped into the trend of learning about crypto early. Cryptocurrency traders of all age ranges are actively trading even at this very moment. It is a short-term business and a long-term business. Short-term trading is called day-trading, where you constantly watch the values of different cryptocurrency and track its progress, in an effort to catch it at the perfect moment. This is high-risk, high-reward. Long-term trading is just that, long-term, and requires heavy study of specific cryptocurrencies to predict possible investment opportunities.

If you’re in Wisconsin, the state pretty much follows the same rules as the federal law when it comes to crypto taxes. That means the rules for reporting your crypto transactions at the national level apply right here at home.

Relevant National Crypto Laws/ Rules:

Taxable Events: Cryptocurrencies in the U.S. are treated as property, not currency, for tax purposes. 

Capital Gains Tax: Profits from selling or trading cryptocurrencies are subject to capital gains tax based on the difference between the selling price and the original purchase price.

Reporting Requirements: Taxpayers must report cryptocurrency transactions, including capital gains or losses, on Schedule D of Form 1040.

Mining: If you mine cryptocurrencies, the fair market value of the coins received is considered taxable income and needs to be reported.

Tax Forms: The IRS issues Form 8949 and Schedule D for reporting capital gains and losses from cryptocurrency transactions. 

Penalties for Non-Compliance: Failure to report cryptocurrency transactions or pay taxes on cryptocurrency income can result in penalties, fines, or criminal charges.

Again, it is important to note a recent change in the industry and the law that went into effect on Jan. 1, 2024: all Americans receiving $10,000 or more in cryptocurrency transactions must file a report with the Internal Revenue Service (IRS) within 15 days. “If you don’t file a report within 15 days of receiving the transaction, you could be found guilty of a felony offense,” Coin Center states. Coin Center is the leading non-profit focused on the policy issues facing cryptocurrencies.

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