In 2014, the IRS issued Notice 2014-21, and clarified that virtual currency is treated as property for tax purposes. This property will be taxed as either ordinary income or as capital gain income or loss, depending on the type of transaction entered into.
Ordinary income is realized on transactions where you earn crypto, including staking rewards, referral and affiliate bonuses, airdrops and Defi interest, to name a few.
Capital Gain and Capital Losses
The sale or exchange of an asset (eg; stocks, metals, crypto, etc.) on the Uphold platform results in a capital gain or capital loss that needs to be reported for US income tax purposes. A capital gain will result when the asset is sold for more than it cost (the basis). A capital loss will result when the asset is sold for less than the basis. In order to accurately report capital gains and losses, taxpayers must classify whether they’re short-term or long-term.
Generally, if an asset is held longer than one year before it’s sold or exchanged, then it’s a long-term capital gain or loss. If the capital asset is held less than a year it is a short-term gain or loss.
If you’re a resident or citizen of the United States, any gain/loss you make from cryptocurrencies must be reported in your annual tax return.
Like all crypto platforms operating in the United States, Uphold has a legal duty to collect Social Security Numbers (i.e. Taxpayer Identification Numbers “TIN”) and file an annual report to the IRS on crypto transactions by U.S. citizens or residents. Having the proper TIN on file with Uphold will allow for easier compliance with US reporting requirements.
If you’re no longer a U.S. resident or citizen, please contact our support team who’ll be happy to help you change your status. A simple change of address (supported by documentation) can mean you do not have a reporting requirement. Keeping your address up to date is important, especially for foreign nationals working in the U.S. temporarily.