Cryptocurrency’s value plummets. Here’s what it means for your taxes

Cryptocurrency’s value plummets. Here’s what it means for your taxes

StefaNikolic | E+ | Getty ImagesHolders of cryptocurrency have more than price volatility to worry about this year. The taxman wants to know about your trading activity.Bitcoin hit fresh highs during the weekend, creeping toward $42,000 on Jan. 8. However, its value tanked on Monday amid a sell-off in cryptocurrencies, and bitcoin's value is now hovering around $33,000.Regardless of whether you interpret the decline in price as a buying opportunity or an alarm to get out, you'll need to share the information with the IRS.More from Smart Tax Planning:Why small businesses face a nightmare tax situationSome newlyweds face marriage tax penalty for 2020 vowsRemote workers could face surprise state taxes for 2020Transactions you partake in this year will be reportable when you submit your 2021 tax returns next spring.This tax season, the taxman asks a "yes or no" question on the front page of the 2020 federal income tax return: "At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?""If you're particularly active using bitcoin, not only is every transaction potentially income or a deduction, but when you use it to pay for goods, you could have reportable gain