**KMAF HAS RECENTLY STARTED USING EMAIL AS A MEANS TO SEND THE MOST UP-TO-DATE TAX INFORMATION TO OUR CLIENTS.  WE WILL NOT SPAM YOUR EMAIL WITH ADS, ONLY INFORMATION**

The last four years have seen explosive growth with investing in virtual currencies.  Sadly, most taxpayers don’t understand virtual currency activities’ taxation and reporting requirements.  The IRS has not released any new guidance on the taxation of virtual currencies since 2019.  The IRS has continued to use a letter campaign to taxpayers with known virtual currency holdings who may not have correctly reported the transactions.  The letters are Letter 6174-A, Letter 6174, and Letter 6173.  Let us know IMMEDIATELY if you received one of these letters.

In general, here are some things to keep in mind:

• The IRS has determined that virtual currency is treated as intangible personal property, not currency.

• For taxpayers who have held a virtual currency for more than a year, the gain will qualify for capital gains rates.  Conversely, those with capital losses are subject to the $3,000 capital loss limitation.  To do so, you must file a tax return disclosing those losses.  Those capital losses are carried forward for future use against capital gains.

• Wages paid to employees and payments made to independent contractors using virtual currency are taxable to the employee/worker.

• Taxpayers who “stake” their virtual currency must include in gross income the fair market value of the staking rewards on the date the rewards are earned.

• Taxpayers who receive virtual currency through an “airdrop” must include the value of the currency received in their income on the date of the airdrop.

Please advise whether you have mined, staked, bought, sold, sent, or received any virtual currencies in the last few years.  

We want to make sure these transactions are correctly tracked and reported.  Please do not hesitate to contact us with any questions.

If you would like KMAF to reach out to you regarding your Virtual Currency activities, please fill out the form located here: https://forms.office.com/r/xFEuvX2gkN

Sincerely,

Kram, McCarthy, Ayers & Frost, LLC