If you’re like most people, you probably don’t think about taxes quite as much as you should. This is especially true if you’re in the crypto world, where making money can be pretty easy – but it still pays to know what you’re doing!
In this blog post, we’ll give our tips on how to figure out your crypto tax liability and get your finances in order so that you don’t have to worry about it come April 15th. We’ll also cover some of the key tax provisions related to cryptocurrencies – so read on if you want to make sure that all of your profits are accounted for!
1. Don’t forget to pay your taxes!
Cryptocurrency and blockchain are new technologies, so it’s important to make sure you’re paying your taxes on all of the income you earn. Here are a few tips to help keep things in check:
- First and foremost, consult with a tax professional who is familiar with these complex topics; they will be able to give you a full scope of your situation and advise on the best way to manage your taxes
- Pay attention to any transactions that may be taxable- for example, if you sell cryptocurrency or tokens for cash, those will likely be considered taxable events!
- Always track your income and expenses carefully- this information can help identify potential tax liabilities as well as provide valuable insight into how your business is performing
2. Know the difference between crypto and regular money
Cryptocurrency is not treated the same as regular money when it comes to taxes. For individuals, crypto transactions are considered taxable events. This means that you will pay tax on any profits made from selling or trading cryptocurrency.
Businesses that deal with cryptocurrencies should keep careful records of all transactions and pay tax on any profits made in accordance with the Tax Cuts and Jobs Act (TCJA). The TCJA lowered the corporate income tax rate from 35% to 21%, so any business making over $2 million in profit will be exempt from paying federal income taxes for 2018 and 2019. However, businesses must still file IRS Form 1065 every year to report their annual income, business expenses, capital gains/losses, etc., regardless of whether they have paid federal income taxes in past years.
As a Tax Professional working with clients who engage in Bitcoin and other Cryptocurrencies, it’s important for me to understand both sides of this complex topic so I can provide helpful advice based on your specific situation. You will find some really good tips from this complete bitcoin tax guide. By following these tips, you can minimize your risk while still complying with government regulations:
– Do your research: Understand what kind of cryptocurrency you’re investing in and which ones are subject to taxation; there are many types of cryptos out there!
– Store your coins securely: Keep your coins safe online where no one but you has access to them; if something happens where you lose access to your digital assets, it’s much!
3. Understand taxation of crypto gains and losses
Cryptocurrencies are still subject to taxation, just like any other type of investment. Make sure you understand the taxation of gains and losses so you can stay compliant.
Crypto traders must keep track of their profits and losses in order to determine if they owe taxes on them. Consult with a tax professional to make sure your trades comply with all applicable laws and regulations.
Taxation is fundamentally about solving problems for people, which is why it’s important for crypto traders to remain compliant with all relevant tax laws. By following these tips, not only will you be staying ahead of the game, but you’ll also have peace-of-mind knowing that your investments are being handled correctly by professionals who know what they’re doing..
4. Report your profits and losses properly
It is important to report your profits and losses properly in order to pay the right taxes. The following are a few tips that will help you do just that:
- Keep good records. Make sure you keep accurate financial records of all transactions, including when and where you acquired items, what was paid for them, and any other expenses related to your business. This will help you easily determine your profits and losses
- Consult with a tax professional if you are not sure how to report your profits and losses. A tax professional can provide guidance on the most effective way to file your taxes based on the specific facts of your situation
- Be aware of possible crypto-currency taxation issues. If you own or trade cryptocurrencies, beware of potential IRS rules regarding cryptocurrency income and gains/losses
5. Pay attention to capital gains, capital loss limitation and wash sale rules
Cryptocurrencies are not just a new investment opportunity; they’re also subject to capital gains, capital loss limitation and wash sale rules. These legal considerations can impact your taxes in three important ways:
- Capital Gains and Losses: Cryptocurrencies are considered property for tax purposes, which means that you’ll pay income tax on the appreciation (or decrease) in value of your cryptocurrency holdings over time. This includes any gain or loss from the sale, exchange or disposition of cryptocurrencies .
- Cap-L Imposition: The IRS has issued guidance stating that virtual currency is treated as property for tax purposes , meaning that you must report all taxable events related to your cryptocurrency holdings including short sales , stock splits etc.. Furthermore, any profits generated from these transactions will be included in your annual income unless you qualify for one of the long-term capital gains rates .
- Wash Sale Rules: If you sell Bitcoin within 36 hours after buying it–even if the price at which you sold it was lower than the price at which you bought it–then part or all of the proceeds may be classified as a “wash sale.” A wash sale occurs when an individual sells securities at a lower price than what he or she paid for them by making an illegal entry into an order book (a list of buy and sell orders). Under current law, this would result in a 100% penalty on the amount above his original cost basis In other words.
Thank you for reading this blog post. In this article, we discussed the different tax obligations that are associated with cryptocurrency trading and investing. We also emphasized the importance of filing taxes correctly and making sure to follow all the applicable rules. Before starting your crypto tax process make sure to check the list of crypto tax free countries, see if you are listed or not. Finally, we provided some tips on dealing with capital gains and losses, as well as reporting profits and losses accurately. Thanks for taking the time to read!