In 2020, the IRS started explicitly asking about cryptocurrency on individual tax returns, with a yes or no question on every taxpayer’s return about whether the taxpayer acquired or sold any virtual currency that year. Saying yes did not mean the taxpayer necessarily owed any taxes on that digital transaction. Only 2.3 million taxpayers said yes. Explore our site The nature and volume of these transactions do not seem to marry well with the sorts of long-term capital investments which are usually taxed at the lower rate. In fact, at Bitcoin’s most recent peak in November 2013, there were 93,000 transactions in a single day where people bought everything from haircuts to hoagies and houses. This suggests that Bitcoin is not used as a tool for long term investment.

To become more active in a crypto community, tax professionals could begin to use channels like Telegram, Discord, and Reddit to participate in focused crypto forums or engage in other social media discussions about crypto. Tax professionals could also attend meet-ups of crypto groups or cryptocurrency conferences, or even join or organize a crypto tax webinar. How is lost and stolen cryptocurrency taxed? Generally, cryptocurrency gains can be subject to two taxes: short-term capital gains and long-term capital gains. Often, short-term capital gains, which are earnings on assets held for less than a year, are taxed at a higher rate than long-term capital gains. Calculating capital gains, especially if you’ve traded crypto or used it to pay for goods, can be confusing, which is why it’s wise to enlist a CPA for American expatriates to handle your taxes. In addition to paying taxes on cryptocurrency, expats will need to report foreign holdings and financial assets if they exceed a certain amount.