• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Pridgeon & Zoss, PLLC

Just another WordPress site

  • Home
  • Firm Overview
    • Review Us
  • Meet Our Attorneys
  • Tax Law Services
    • CP504 Notice in MN
  • Professional Referrals
  • Our Required Retainer Deposit & Fees
  • Blog
  • Contact Us
Home / IRS / IRS provides guidance on reporting cryptocurrency income
  • Home
  • Firm Overview
    • Review Us
  • Meet Our Attorneys
  • Tax Law Services
    • CP504 Notice in MN
  • Professional Referrals
  • Our Required Retainer Deposit & Fees
  • Blog
  • Contact Us
Call
Contact
Blog

IRS provides guidance on reporting cryptocurrency income

Many investors in Bitcoin and other virtual currencies have been confused about how those investments are taxed. As we’ve noted before on this blog, cryptocurrency gains are taxed like capital gains. That means that you’ll need to keep detailed records on what you paid and what you got when you sold the virtual currency. You will be taxed based on the difference.

Additionally, if you transfer virtual currency between two accounts (“wallets”), you must also document those transfers in order to show the IRS that the transfer was tax-free.

And, if you hold a virtual or cryptocurrency investment for less than a year, your gains are taxed at the short-term capital gains rate. You need to hold them for a year before they qualify for the preferential rate of 23.8%.

Recently, the IRS issued a ruling and a Q&A document on reporting gains from virtual or cryptocurrency investments. That’s important because auditors are currently focusing on these investments, according to Accounting Today. The two documents provide useful guidance for those with virtual currency investments and those who receive virtual currency in other transactions, such as payment for services.


A ‘hard fork’ is a taxable event

For virtual and cryptocurrency investors, one issue to keep an eye out for is when the currency splits in what is called a “hard fork,” where the split e-coins are distributed via air drop. According to the IRS, this is a taxable event and you must pay the appropriate capital gains taxes.

“One unfortunate consequence of this guidance is that third parties can now create tax reporting obligations for you by simply forking a network whose coins you own, or foisting on you an unwanted air drop,” said the advocacy group Coin Center in a statement.

If you are concerned about how to account for virtual currency investment income or how virtual currency is taxed otherwise, discuss your situation with an experienced tax attorney.

On Behalf of Pridgeon & Zoss, PLLC Oct 21 2019 IRS

Primary Sidebar

Do Not Delay Responding to a Tax Notice

Name(Required)

Practice Areas

Tax Disputes

  • Tax Litigation
  • Audits
  • Tax Appeals
    • Appealing a Levy Action

Business & Payroll Taxes

  • Trust Fund Assessments
  • Complying with Sales and Use Tax Laws

Self-Employed

  • No Taxes Withheld

Outstanding Balances

  • IRS Collections and Currently Not Collectible Status
  • Settlement Options
    • Offers in Compromise
    • Installment Agreements

Latest Blogs

5 Things to Do if You Get Audited in Minnesota

March 27, 2023

What is a Trust Fund Recovery Penalty?

January 31, 2023

A Guide to the Minnesota Tax Appeal Process

January 27, 2023

The Secret to Successful Self-Employment

October 19, 2022

Things You Should Expect Being Self-Employed in Minnesota

October 13, 2022

Footer

Edina Tax Law Office

4951 W 77th Street, Box 11
Edina, MN 55435

Telephone: 952-835-8320

Fax: 612-682-4711

Roseville Tax Law Office:

1915 Hwy 36 West, Box 3
Roseville, MN 55113

Telephone: 612-455-8948

Pridgeon & Zoss, PLLC provides legal counsel for clients in Minnesota and Western Wisconsin

© 2025 Pridgeon & Zoss, PLLC. All Rights Reserved.

Disclaimer | Site Map | Privacy Policy