Do those who Earn Money on Cryptocurrency in the US Have to Pay Taxes?

At the end of 2017, Donald Trump signed a bill on amendments to the US Tax Code. In accordance with is all transactions with cryptocurrencies will be taxed.

More specifically, the new provisions, which came into force on January 1, 2018, amend Article 1031 (a) paragraph 1 of the IRC section of the US Tax Code. They concern “exchange-like operations,” as for a long time they were not taxed. Because of this, in particular, Americans could quietly exchange works of art and real estate, without paying taxes. By the same principle, the exchange of cryptocurrency was regulated. Since the beginning of this year, this order has remained for real estate but has ceased to extend to the exchange of bitcoins and other ones.

Here some tips for future miners in the USA:

  • Unlike other countries, America’s tax on cryptocurrencies existed earlier. It was actually income tax. Since 2014, holders of cryptocurrencies have been required to pay capital gains tax only after exchanging their bitcoins for ordinary money. However, in 2013-2015, taxes from bitcoin operations were paid by only one thousand people. The tax authorities even started the case on the crypto exchange Coinbase, demanding the issuance of a database of owners of such coins.
  • Now new bill extends to all operations with cryptocurrencies. The tax will have to be paid even if the investor wants to change bitcoin on any other cryptocurrency. If the mining’ result is simply stored for less than a year, then it falls under the standard personal income tax with a progressive scale of 10% to 37%. If more than a year, then there is already a tax on long-term capital growth with a rate of up to 24%.
  • For law-abiding investors, the process of preparing reports on profits from digital currencies – it is taxed as ordinary income in the short term or as capital income in the long term – will become more stressful, because the e-exchanges will be required to provide their customers with reporting form No. 1099. This form is used by brokerage firms (for example, Fidelity) and contains the summary information on the investment income for the period (for each quarter and for the year). It is provided to both the client of the exchange and the tax service.
  • According to Fortune, the US tax service ordered the Swiss company Chainalysis to develop special software to identify tax fraud in transactions with bitcoins in order to identify investors who will evade taxes.
  • Experts claim that the US fiscal watchdog bodies will focus only on “large fish”. For example, in the above dispute with the Coinbase exchange about the users’ lists, the tax authorities agreed to limit their request to customers whose one-time transaction exceeded $ 20,000.

However, forum users are outraged by the fact that such stock exchanges as Coinbase (USA) or Mt. Gox (Japan) etc. store wallets in such a manner that analytical companies can identify the ultimate owners of cryptocurrency. People who make a profit on mining offer to change their ID status to other digital currencies, for example, Monero, which is more difficult to track.

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