Bitcoin, Ethereum and other cryptocurrencies have been rising in popularity, and the IRS is taking notice. Tom Wheelwright joined Robert Kiyosaki on the Rich Dad Channel to discuss virtual currencies and income tax.
“The IRS is doing more and more audits, and more and more audits on cryptocurrency,” said WealthAbility® CEO Tom Wheelwright.
The IRS recently released a notice providing guidance on how existing tax principles apply to virtual currency. Download the Cryptocurrency Tax Guide and the full IRS notice here.
Click here to download guide
Using or trading virtual currency is a taxable transaction.
According to the notice, anytime someone uses or trades virtual currency, it is a taxable transaction. Wheelwright discussed the issue with Robert Kiyosaki on The Rich Dad Radio Show podcast.
“The same thing would happen if you went and used silver or gold to buy something,” Wheelwright said. “That would be a taxable transaction, too.”
This may be a surprise to fans of Bitcoin who think of the cryptocurrency as a way to avoid the eye of the IRS.
“People think that, ‘I have Bitcoin, and so I’m good,’” Wheelwright said. “But you only can use that Bitcoin for the most part when you convert it to dollars.
“It’s not like there’s a huge marketplace where you can go out and buy houses using Bitcoin. Most people aren’t going to accept Bitcoin in exchange for their house, so you’re exchanging it for dollars. When you do that exchange, that’s where the IRS is going to track you.”
The news isn’t all bad for cryptocurrency investors.
Wise investors with a solid tax strategy — whether they choose cryptocurrency or other investments — can legally and permanently reduce or eliminate their tax liabilities by managing their tax deductions and making strategic investments in things that the government incentivizes through tax credits.
“There are all sorts of things you can do here once you understand the tax law and how incentives work,” Wheelwright said.
Click here to learn how you can pay way less tax.
I would like to download the publication about bitcoin taxes.
I cannot find a search on your website like you mentioned In Robert K’s interview.
Hi Jennifer. If you click on the report above directly in the post, the document will automatically download. Let us know if you have any problems. Thank you!
The tax notice for how crypto is taxed is replaced with Trumps accomplishments.
Is there somewhere else you have the information?
According to this article in Forbes crypto is considered an asset like stocks and is not taxable until sold, so whether or not it has to marked on the tax return is up for debate:
https://www.forbes.com/sites/ambergray-fenner/2021/03/05/irs-adds-new-guidance-but-form-1040-cryptocurrency-question-is-still-causing-confusion/?sh=77094f30699a
This has been a point of contention as the question asked on the tax return is very broad in its asking: “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” The IRS did come out with guidance in the FAQ section about not being required to answer yes to the question if you only purchased the currency, however, these are not an authority for taking a position on a tax return. While we understand that the purpose of the question is so that the IRS can determine if there were any sales of cryptocurrency their guidance seems to be out of line with the actual question. From our understanding of the question, even just purchases in crypto currency, would require the box to be marked.
Tom,
Great article and info on the Rich Dad podcast.
Q: Is exchanging one cryptocurrency for another considered a taxable event or can it be considered a “like-kind” exchange allowing me to defer capital gains until I convert it back to USD?
Exchanging one cryptocurrency for another is considered a taxable event. The Tax Cuts and Jobs Act narrowed the focus of 1031 exchanges and restricted the transactions to Real Property, like Real Estate. Therefore a 1031 exchange in not an option for cryptocurrency.
I, too, would like the information from the bitcoin tax publications that was talked about on the Robert Kiyosaki radio show and interview with Tom Wheelwright. It was a very informative and thought provoking program. Thanks
Hello Frank,
The document is in the blog post above. Just click on the image of the document and it will download for you. Thanks.
i dont see the IRS bulletin..
Hello. The bulletin is included in the download. Just click on the image and the full document including the bulletin will download. Thanks.
I to would like to download the publication regarding bitcoin and taxes.
Hi Phil,
The publication is directly above in the post. Just click on the image or the link above it. Thanks!
Hi Tom, the rich dad, poor dad interview brought me here. Really good and informative stuff; keep it up.
Q: If I bought some bitcoin(fractional) and sent/transferred it to another person i.e. my gf, friend or kids wallets, to get them into crypto, would those be taxable?
The scenario you’ve described is a gift, so there could be gift tax.