Have Cryptocurrency? You May Owe Taxes!

About a year ago, I was having lunch with a couple of other guys and one of them began telling us how successful his Bitcoin investment had been. I asked him how the IRS was treating this and he said, with a straight face, "Oh, they aren't even in the picture! You don't pay taxes on crypto currency. Immediately, the other fellow and I started shaking our heads. I said "I'm pretty sure you will owe. As far as the IRS is concerned, income is income." He scoffed at the remark and we moved the conversation along.

Well, guess what? Uncle Sugar is coming for his cut of the action. As reported by Reuters, the IRS has sent over 10,000 letters to individuals who they believe may owe taxes on these transactions. Last summer, the agency began advising that it would pursue taxes due from all sources of income, including crypto currencies.  Letters started going out in July of this year and will continue through August, according to the Reuters story.

So, if you've been trading in crypto currencies,you might want to contact your accountant and figure out what you owe before you find yourself in a tax hole.