Cryptocurrency Continued: Currency in Computer Code

Cryptocurrency Continued: Currency in Computer Code

As discussed in our previous article, investors and cryptocurrency experts alike believe that tokens will one day be a widely accepted form of recognized currency. In this new era, you would make purchases and earn income in tokens like Bitcoin. I know what you’re thinking; with a single Bitcoin worth over $39,000 (as of the drafting of this article), how could one possibly get paid in it?

That’s the advantage that cryptocurrency has over traditional cash; it’s totally digital and based upon complex mathematical formulas being solved by computers on a constant basis in the blockchain. You could break down a token into fractions that go for several decimals which offers you the ability to spend 0.0003 Bitcoin for that burrito from Chipotle. Precise and flexible payments allow for more accurate transactions and potentially more savings on high volume production costs.

Spending Cryptocurrency as Cash

The majority of retailers accepting cryptocurrencies use third-party processors, such as Bitpay and Cryptopay. Understanding how the payment system works and what fees may be involved before you jump in is wise. Shopify is a processing system used by many small, local businesses, that allows businesses to accept Bitcoin payments. Further, the popular payment app Square will roll out Bitcoin marketplace options that will likely allow customers to purchase products and services with cryptocurrency. Finally, Stripe, a payment processor, allows companies to integrate a Bitcoin payment form right into their websites.

Just as all other types of currency transactions are reported, the IRS is notified of all transactions on these platforms. If you sell goods or services through these platforms and only accept cryptocurrency thinking the new currency isn’t subject to taxation or the income would be harder to find by the IRS and other tax agencies, think again.

Cryptocurrency Profits Are On the IRS’ Radar

Profits on cryptocurrency from methods like speculative trading on the ups and downs of crypto are subject to capital gains taxes similar to stock transaction gains held less than a year are. Crypto earned from transacting with goods and services is taxed as ordinary income, broken down into the seven federal tax brackets. Even further, there are a few distinct ways the income can be viewed; a fixed employer-paid salary or self-employment income earned for goods and services. Depending on your unique circumstances, identifying between the two is important and can each have its advantages. You should consult with a tax professional on the best way to structure your income in tax preparation and reporting your cryptocurrency accurately to the Internal Revenue Service.

It is important to remember that cryptocurrency isn’t an underground currency as it once was. By becoming more mainstream, more regulations from governments and a greater focus on tax collection from governmental tax agencies worldwide will follow. J. David Tax Law estimates there will be tens of thousands of individuals receiving tax bills in the coming months for cryptocurrency trading gains and from the sale of goods or services.

Cryptocurrency Representation in Jacksonville, FL

At J. David Tax Law in Jacksonville, FL, our tax attorneys are experts in the fallout from unpaid taxes on cryptocurrency gains and taxation of cryptocurrency. This article was written by one of our senior attorneys who is a taxation and cryptocurrency expert.

If the IRS contacts you about a cryptocurrency tax debt, contact the experts at J. David Tax Law for a no-cost consultation and immediate representation. If the IRS Is taking aim at you, the sooner you act the lesser the impact will be.