Frequently Asked Questions

What Type Of Gain Or Loss Does A Taxpayer Realize On The Sale Or Exchange Of Virtual Currency?

What type of gain or loss does a taxpayer realize on the sale or exchange of virtual currency? The character of the gain or loss generally depends on whether the virtual currency is a capital asset in the hands of the taxpayer. A taxpayer generally realizes capital gain or loss on the sale or exchange... [Read More]

Does A Taxpayer Have Gain Or Loss Upon An Exchange Of Virtual Currency For Other Property?

Does a taxpayer have gain or loss upon an exchange of virtual currency for other property? Yes. If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain. The taxpayer has a loss if the fair market value of... [Read More]

How Is The Fair Market Value Of Virtual Currency Determined?

How is the fair market value of virtual currency determined? For U.S. tax purposes, transactions using virtual currency must be reported in U.S. dollars. Therefore, taxpayers will be required to determine the fair market value of virtual currency in U.S. dollars as of the date of payment or receipt. If a virtual currency is listed... [Read More]

What Is The Basis Of Virtual Currency Received As Payment For Goods Or Services In Q&A-3?

What is the basis of virtual currency received as payment for goods or services in Q&A-3? The basis of virtual currency that a taxpayer receives as payment for goods or services in Q&A-3 is the fair market value of the virtual currency in U.S. dollars as of the date of receipt. See Publication 551, Basis... [Read More]

Must A Taxpayer Who Receives Virtual Currency As Payment For Goods Or Services Include In Gross Income The Fair Market Value Of The Virtual Currency?

Receiving payment in virtual currency for goods or services Yes. A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, 3 measured in U.S. dollars, as of the date that the virtual currency was received. See Publication 525, Taxable... [Read More]

Is Virtual Currency Treated As Currency In Foreign Currency Gain Or Loss Under U.S. Federal Tax Laws?

For purposes of determining whether a transaction results in foreign currency gain or loss under U.S. federal tax laws No. Under currently applicable law, virtual currency is not treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes.

How Is Virtual Currency Treated For Federal Tax Purposes?

How is virtual currency treated for federal tax purposes? For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.

How Do Taxes Work When You Have Your Own Business as Self Employed?

How Do Taxes Work When You Have Your Own Business as Self Employed? Your company profits are added to other income (interest, dividends, etc.) on your personal tax return. Qualified Sole Proprietors are able to take advantage of the 20% tax deduction, which allows them to deduct 20% of the business’s net income from their... [Read More]

When Do I Need to Issue a 1099-NEC?

When Do I Need to Issue a 1099-NEC? If you pay someone $600 or more for services during the tax year, you have to issue a 1099-NEC. This does not include payments for products.

What’s the Difference Between a Form W-2 and a Form 1099-MISC or Form 1099-NEC?

What’s the Difference Between a Form W-2 and a Form 1099-MISC or Form 1099-NEC? Employers who withhold payroll taxes issue Form W-2 to employees. Payers use Form 1099-NEC, Nonemployee Compensation for people or companies who provide services. Compensation to: Report payments made of at least $600 in the course of a trade or business to... [Read More]