2017 was the year when people who invested early in Bitcoin watched gleefully as the cryptocurrency’s value soared, giving them an extraordinary profit on their initial investment. By contrast, those who purchased Bitcoins in recent months when their value was highest are now beginning to see a drop in that value, even if it is a gentle downfall for the time being.
As with traditional currencies, Bitcoin brings with it a series of tax obligations, many of which fly under the radar with so much attention on its overall value. Essentially, if you profit from a Bitcoin investment, you are liable to pay tax on that profit, even if you don’t intend to keep any of it for yourself. There may be cut-off points below which you could get tax exemptions, but anything above this cut-off point would usually require the completion of a full tax return. You may, however, be able to make certain deductions from your Bitcoin tax bill, such as the cost of purchasing and disposing of assets or mining expenses on Bitcoins earned from verifying transactions.
It’s quite possible that you may have made dozens of Bitcoin transactions without ever knowing the tax implications involved. If you haven’t paid tax on your Bitcoin profits because you didn’t realise it was taxable, you should contact the Revenue immediately and make an unprompted qualifying disclosure so that you won’t be subjected to subsequent investigations. When making such a disclosure, include as many details about the transactions as possible and, if feasible, pay off any taxation that was due – it’s fine to do this in instalments if you prefer.
This infographic from All Finance Tax (http://allfinancetax.com/capital-gains-tax-returns/) explains more about the obligations regarding tax on Bitcoin profits and gives advice for business owners, seasoned Bitcoin investors and casual Bitcoin users.