Are bitcoin tax records ever optional with irs_ expert blog price of bitcoin

Cryptocurrency may be a new topic for the IRS and taxpayers to tackle but tax records are certainly not a new issue. Since the dawn of the income tax, some taxpayers have struggled with this, and the IRS knows it. At tax time, many taxpayers find themselves scrambling for receipts, looking in file folders and drawers.

These days, much of the looking is in computer files and with online services that you hope will still have the records you need. In fact, with large numbers of people placing increasing reliance on cloud services and similar types of records, the records problem today can actually be acuter than it was decades ago. There is much talk today about IRS investigations, enforcement and audits.

Yet when you come right down to it, our income tax system is largely one of self-assessment.The price of bitcoin

we mostly do our own reporting, starting with self-reporting on our own tax returns. That is where it all begins, and to self-report, you need records. Besides, you need to be able to back up what you put on your tax return if you are asked.

Remember, you sign tax returns under penalties of perjury. Do not make up the numbers and do not estimate, except as a very last resort. In general, receipts and proof in tax matters are critical. In fact, the internal revenue code and the treasury regulations are full of substantiation requirements. Receipts, invoices and canceled checks count big time.

If you are ever audited and you need to account for any capital gain, especially long-term where the tax rate is reduced, you may have to show documentation to prove your position. You need to be able to prove any tax basis you claim.The price of bitcoin you need to be able to prove your holding period too. Keep a record

The burden is always on you to keep documentation and perform recordkeeping. What if an exchange you are using suddenly goes out of business and disappears? You may suddenly not be able to get your records. That could mean not being able to establish your basis or your holding period.

That is one reason having a backup system of your own can make sense. However, you can keep it straight, try to keep good records of all your trading and investment activity. That is true with cryptocurrency or any other investment assets.

Downloading and exporting transaction details or copying it all down however works for you. Since purchases made with cryptocurrency are dispositions, keep a record of dates, amounts and details of those dispositions too.The price of bitcoin what happens though if there are holes in your records? But if not..

It isn’t clear whether the IRS will apply different standards to cryptocurrency records. However, the substantiation requirements are likely to be similar in this context to others. Fortunately, there are some positive historical cases in which taxpayers have won tax cases even though their records were downright lousy.

That is, sometimes, the lack of a receipt may not prevent you from claiming a deduction or even prevailing in court if you end up in a fight with the IRS. In fact, if you can’t find your records or receipts, it is worth remembering the so-called cohan rule. This tax rule had its genesis in cohan v. Commissioner, 39 F.2d 540 (2d cir. 1930).

George M. Cohan was an early broadway pioneer, authoring such hits as “give my regards to broadway” and “yankee doodle boy.” cohan had a big appetite, and he spent money in a big way.The price of bitcoin his statue still stands in new york’s times square. But the IRS disallowed many of cohan’s show business travel and entertainment expenses for lack of receipts…

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