The IRS reminded taxpayers Friday that anyone who made money in 2017 by trading in cryptocurrencies like bitcoin must report that income, and could face criminal charges if they don’t.
The IRS said it’s aware that people “may be tempted to hide taxable income,” especially income earned by trading in difficult-to-trace virtual currencies.
But it said trying to avoid taxes this way is a bad idea.
“Virtual currency transactions are taxable by law just like transactions in any other property,” the IRS said. “Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest.”
2017 was a big year for cryptocurrency speculators, and a single bitcoin soared to almost $20,000 in value in December. It has since fallen to under $9,000, and other currencies have fallen as well.
The IRS warned that criminal penalties could apply to people who profited from the boom and don’t report it.
“In more extreme situations, taxpayers could be subject to criminal prosecution for failing to properly report the income tax consequences of virtual currency transactions,” the IRS said. “Criminal charges could include tax evasion and filing a false tax return.”
People convicted of tax evasion can face up to five years in prison, and filing a false return can lead to up to three years in prison, the IRS. Both charges can also lead to a fine as high as $250,000.
The individual income tax deadline is right around the corner, and falls on April 17 this year because April 15 is a Sunday and April 16 is a holiday in Washington, D.C.
