Here’s what you need to know for your 2020 taxes when reporting virtual currency to the IRS – CNBC

South_agency E+ Getty Images

The value of Bitcoin is skyrocketing. If you’re planning on selling now and pocketing the gains, Uncle Sam is going to want his share.

This week, the cryptocurrency hit price it hasn’t seen since 2017, climbing toward $18,000 for one unit of Bitcoin. Over the course of 2020, it’s price has risen by more than 150%.

Just be aware that whether you mined, purchased or sold your share of Bitcoin this year – or any other cryptocurrency – you’ll have to tell the IRS when you file your taxes next spring.

Indeed, the front page of the individual income tax return, aka Form 1040, asks a yes or no question: “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

“That’s one of the things taxpayers need to pay attention to,” said Kirk Phillips, CPA and member of the American Institute of CPAs’ Virtual Currency Task Force.

“We’ve seen CPA firms that haven’t really wrapped their head around this stuff,” he said.” They have filed the returns but didn’t correctly check the box or didn’t report the transactions.”

Not just buying and selling

Understanding your tax treatment

studioEAST Getty Images

In general, the IRS considers virtual currency to be property – the same way it treats stocks or other investments.

This way, if you bought some Ethereum