8

PayPal had a promotion without fees a long time ago, they also did it December 2020 and I just sold crypto again through paypal. This time they mentioned some sort of tax form, which somehow I was unaware of the previous year. Anyway, last year, 2020, I definitely did NOT file my crypto profits I made in 2019 which I bought a partial part of Ethernum for 40USD and it went up to 86USD when I sold it. I thought I had to make at least a few thousand before I had to pay taxes but after looking it up it seems I have to pay at least a 10% tax on it no matter what. Though I'm not even sure because different sites are telling me different information on cryptocurrency.

What should I do? Is there any site that has good crypto tax information because it's difficult to find one.

Improve this question
9
  • 5
    What country would you have filed taxes?
    – Pete B.
    Mar 10, 2021 at 12:30
  • 9
    Technically, you do owe a few dollars in taxes. For $46 in gains, which you accidentally failed to report, it is very unlikely that anybody would ever care. You could file an amended return, but the cost to them to process your amended filing would be more than the amount of the tax. Just make sure you report correctly in the future. (And on the off chance they do contact you about the transaction, just be honest and pay whatever they ask for. The penalties for accidental small underpayments are not severe; in the cases I'm aware of they are limited to 25% of the amount owed.)
    – Glenn Willen
    Mar 10, 2021 at 20:54
  • 1
    "drug dealers declare the profits of their criminal activities?" mind blown
    – AnoE
    Mar 11, 2021 at 16:02
  • 1
    @AnoE famously, Al Capone was convicted of tax avoidance, not for any of his other (alleged) illegal activities.
    – stannius
    Mar 11, 2021 at 18:41
  • 1
    @GlennWillen Please copy your comment into an answer. (Or, catch it next time.)
    – jpaugh
    Mar 11, 2021 at 23:46

1 Answer 1

Reset to default
31

The IRS has a site about virtual currency, including Frequently Asked Questions.

In general, a gain that you make buying and then selling cryptocurrency is subject to capital gains tax. There is no minimum amount of gain that you need before you have to pay tax, but the capital gains tax rate is based on how long you held the asset before you sold it (more or less than a year) and what your total income is, and the rate can go down to 0% under the right circumstances.

If you had a gain from selling cryptocurrency in 2019 that you did not declare and pay tax on, you can amend your 2019 tax return and pay the tax. I don’t know the likelihood that the IRS would learn about that transaction if you don’t tell them.

Improve this answer
4
  • 15
    Upvoted here. I will note that while OP does owe the federal government taxes on the net $46 he made, in terms of crimes against the people of the United States, this is pretty low on the severity list. OP does not need to worry about the IRS breaking down his door and arresting him. Tho as Ben noted here, the proper procedure would be to file an amended 2019 return and pay what was missed then.
    – R. Hamilton
    Mar 10, 2021 at 15:00
  • 4
    @R.Hamilton Agreed. If the gain is only $46, we are literally talking about a few bucks in potential tax.
    – Ben Miller
    Mar 10, 2021 at 15:08
  • 1
    It sure would be nice if it was possible to modify an existing return to make up for the difference instead of having to amend a previous return (declare that money in 2020 vs 2019). In the end it would be fair to do that, but I don't know if it's legal.
    – TTT
    Mar 10, 2021 at 15:54
  • @TTT Assuming the IRS doesn't receive any notification of these transactions, they won't be able to catch you for the missing tax on the 2019 return, and neither would they notice that you reported extra gains on your 2020 return. So if you're feeling guilty, just add the gain to 2020 instead of amending 2019.
    – Barmar
    Mar 11, 2021 at 15:07

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .