ALBANY, N.Y. (NEWS10) — As the tax filing deadline nears, New York Attorney General Letitia James cautions crypto investors that failure to accurately declare and pay taxes on their virtual investments, could have legal and financial consequences. The deliberate or reckless failure to properly declare and pay taxes on cryptocurrency transactions could constitute civil or criminal violations of the tax law.

Virtual currency investors are warned to consult and follow guidance from the Department of Taxation and Finance (DTF) and the Internal Revenue Service (IRS) to accurately file their taxes and avoid penalties. Officials said violations of tax provisions of the New York False Claims Act, could also result in steep financial liabilities as well.

The IRS said taxpayers’ gross income should reflect the fair market value of the virtual currency, measured in U.S. dollars, as of the date that virtual currency was received. IRS notes this exchange of virtual currency for other properties results in either a gain or loss that must be reported by taxpayers.

For example, taxpayers should calculate and report any gain or loss when using cryptocurrency to purchase a luxury electric vehicle, a plane ticket, or even a cup of coffee. The IRS said retailers and purchasers should be aware of DTF guidance to the spending or accepting of cryptocurrency.

Sales tax is owed on transactions that involve the use of convertible virtual currency to pay for taxable goods or services delivered in New York State said the IRS. To determine the tax due on cryptocurrency transactions, taxpayers are asked to carefully review DTF guidance and other principles set out in the IRS, to determine the tax due on their cryptocurrency transactions.

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