Do You Know the Crypto Tax Basics?
The world of cryptocurrency is constantly changing. With new exchanges opening and a lot more government regulations, crypto traders need help. Unfortunately, most CPAs don’t specialize in preparing crypto tax returns leaving crypto investors without anyone to turn to. That’s why, at Crypto Tax Academy, we’re devoted to teaching tax professionals everything about crypto taxes. Let’s start with the basics.
- Cryptocurrency Is Property
Just like real estate or stocks, cryptocurrency is identified as property, not currency, by the IRS. Because of this, cryptocurrencies are subject to the same short- and long-term capital gains taxes as any other asset.
- Crypto Traders Must Report Every Transaction – Line by Line
When completing someone’s crypto tax return, it’s vital to have a full history of every transaction an investor made. You’ll need these records to complete your clients’ returns. Unfortunately, the government hasn’t kept up with technology, so each transaction has to be listed line by line on IRS Form 8949.
The issue for many cryptocurrency traders is that coin exchanges don’t automatically generate a record for them. This means crypto investors have to keep a manual log of every transaction for each calendar year. However, without these records, cryptocurrency buyers and sellers can’t accurately report their profits or losses.
- The IRS is Watching
Gone are the days when the government turned a blind eye to the emerging world of digital currency. In 2017, a federal judge ruled that Coinbase, the largest exchange for buying and selling Bitcoin, had to turn their customer data over to the IRS. This included the name, birth date, address, and taxpayer identification number of customers who had $20,000 or more in their accounts in any one year between 2013 and 2015.
In July and August 2019, the IRS began sending out letters to crypto traders who may have misreported their cryptocurrency information and owe additional taxes. More than 10,000 American crypto investors received one of three letters from the government agency telling them to review their tax records and make amends when necessary. A second round of more serious letters was also sent in August. This time, traders were alerted that the IRS received information that didn’t match their tax records and gave instructions on how to fix the issue.
- New Regulations are Coming
As time goes by and cryptocurrencies continue to gain popularity, the government will continue having its eye focused on the world of crypto. New regulations are on the way according to IRS Commissioner Charles Rettig, and this makes having a CPA with cryptocurrency training a must for any investor.
- Honesty is the Best Policy
When you’re dealing with a government agency, you need to be honest every step of the way. Crypto traders who fail to report every event could end up facing penalties or even audits from the IRS. Many crypto investors think that because the government was lax in the past, they can leave a few things off in the future. No such luck. Now that the IRS is taking a keen interest in the world of crypto, and even going back through years of records, it’s more important than ever for traders to file their taxes correctly.
As a tax professional, adding crypto to your wheelhouse can take your business to the next level. The fact is, there still aren’t many crypto tax specialists. By receiving your cryptocurrency tax training, you’ll be able to outperform the competition and offer a valuable service to your clients. Want to learn more? Click here to see what Crypto Tax Academy has to offer you!