Bitcoin and tax returns: 7 questions and answers

It’s that time again: the tax return for 2020 must be submitted. What if you also had cryptocurrencies in 2020 in addition to savings and possible investments? In this article, we answer 7 questions you may have about bitcoin and other cryptocurrencies in combination with the tax return.

You have probably already received the blue envelope from Skat. From March 1, it’s time to file your tax return again. Now that bitcoin (and other cryptocurrencies) have made a comeback in 2020, and many people have invested in digital currencies, it is good to consider this in your tax return.

Bitcoin and tax returns: Questions and answers

For how do you disclose your assets in bitcoin and other cryptocurrencies in your tax return for 2020? And what happens if you do not declare your cryptocurrencies?

1. Where do you state your cryptocurrency in the tax return?

Your cryptocurrencies belong to Box 3 (your capital that you have built up by saving and investing) in the income tax. You enter your cryptocurrency under the ‘other assets’ category.

2. Do you always have to pay tax on your bitcoin assets?

You do not always pay tax on your equity. By 2020, this limit will be EUR 30,846. This means that you do not have to pay tax if your wealth is less than EUR 30,846 on 1 January 2020. Please note: we are not just talking about your assets in bitcoin and other cryptocurrencies. Your savings and other investments also fall below equity.

3. How much tax do you have to pay on your assets?

Exactly how much tax you pay depends on your total wealth. With assets up to 100,000 euros, you pay a price of 0.54%. This eventually rises to 1.58 percent with assets of more than $ 1 million.

4. How do you know what your wealth is if the cryptocurrency value is volatile and never the same?

If you submit your tax return for the year 2020, it relates to your assets on 1 January 2020 and thus also the exchange rate on that date. It is therefore best to request the value of your bitcoin or other cryptocurrencies on this day from your brokers.

Tip: from now on, make a print screen of the price on January 1st. It’s not just nice if you start working on your tax return in March. The tax authorities can always ask for a justification for the value you have entered.

5. What if you bought bitcoin after January 1st?

If you did not have bitcoin on January 1, 2020, the cryptocurrencies that you purchased later in 2020 will not count in your tax return for 2020. In that case, you first state how much capital you have in bitcoin and other crypto. 1, 2021. had.

6. How do the IRS know how many cryptocurrencies you have?

Every year, the banks notify the tax authorities of how much money you have in your savings, investment and checking account. These are therefore often pre-filled. Then it’s a matter of checking.

Cryptocurrencies are, of course, digital means of exchange that do not involve an (official) central party such as a bank. It can then be tempting not to list your assets in cryptocurrencies. First, you are in conflict. Second, active crypto exchanges in the Netherlands are required by new legislation to verify customer data. Tax and Customs can therefore request information from Dutch licensed providers to see how much crypto you own.

7. What happens if you do not enter your bitcoin in your tax return?

If you do not disclose your assets in bitcoin and other cryptocurrencies in the tax return and the IRS finds out, the consequences are serious. The tax authorities can impose a fine of up to 300 percent of the tax you had to pay (and which you logically still have to pay). Not only that: it may just be that the tax authorities decide to prosecute you.

Up to five years after the tax return is filed, Tax can still knock on the door to seek compensation. While the IRS may not yet be actively checking whether people are withholding bitcoin and other cryptocurrencies, it could, of course, be a whole other story in five years. The increase in value is currently attracting a great deal of attention in the media and politics.

9 tips for the tax return so you do not leave money

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