[ad_1]
Amid vague crypto laws and insufficient guidance, millions of taxpayers run the risk of presenting incorrect statements
In April 2019, an unprecedented number of US citizens could complete their tax returns with little idea if their documents comply with tax laws.
Millions of US citizens have invested in cryptocurrencies in the last year. Whether they are "hodlers" (those who buy cryptocurrency to hold as an investment) or traders, their moves are subject to vague and outdated tax laws.
[REITs]Q3 letters of hedge funds, conferences, palettes, etc.
This is extremely worrying and, frankly, an unacceptable state of affairs.
There is no sign of new guidance from the IRS before April, so investors and their representatives will have to exercise reasonable judgment to ensure that the positions they assume are defensible.
The first sensible step is to jrecordare cryptocurrency investments and trading activities in as much detail as possible. This includes dates, values and specific quantities of purchases and sales. The next step is to pay attention to the laws as they are, making judgments reasonable and defensible wherever possible.
Hard forks and airdrops (it's not free)
The correct tax treatment of income from a fixed cryptocurrency fork is a particularly gray area of US tax law. After a fork, the original owner of a cryptocurrency keeps their interest in the original currency and also has the right to use the forked currency. This raises a particular fiscal problem: a cryptocurrency owner who experiences a fork immediately realizes a taxable income in the eyes of the IRS?
This is a problem that affects many investors. Bitcoin, for example, has bifurcated several times in 2017, and again in recent weeks. The Bitcoin Cash fork that brought Bitcoin Cash ABC and Bitcoin SV alone effectively doubled the Bitcoin Cash digital currency of each holder.
Despite calls from various parties, from tax experts to US senators, the IRS has yet to offer detailed guidance beyond the 2014 note. Amid this gap, some accountants and consultants are treating the value of coins received as income. taxable on the date of the fork. Yet, I, and many other experts, believe that the tax should be paid when investors sell forked coins with a 100% capital gain. Asking that individuals pay income in value have never had a voice in reception seems contrary to all the principles of fairness, and the American Institute of Certified Public Accountants is an agreement.
The solution? Carefully record all cryptographic investments and trading: prepare to demonstrate transparency when you are audited. Collaborate with a recognized expert in the field of taxes on cryptocurrency, a CPA or a legal professional specializing in crypto. There are excellent tools to help you list your business and provide a detailed audit trail that you can deliver to the IRS in defense of your position. You should always be able to identify each transaction while digital assets are transferred from portfolio to portfolio or exchange to exchange.
Cryptocurrency is property
In the eyes of the IRS, virtual currency is owned and is therefore subject to the tax principles applicable to real estate transactions. In other words, capital gains from cryptocurrency are treated in the same way as profits from trade in swaps involving property.
If you buy, for example, a Bitcoin amount and then sell it to buy Ether, this trade is taxed. Remember, Bitcoin and Ether are treated as properties; if you sell Bitcoins to buy a house, you should also pay taxes. Maintaining accurate recordings of trades can be a great challenge for active and occasional traders, due to the way in which blockchain transactions are executed. Many small pieces of cryptocurrencies are grouped together when making a sale and each piece will have its own gain or loss associated with its individual cost base. FIFO or LIFO will not help you here. This is where accounting software specially designed for cryptocurrency can help. Relying on general accounting software or spreadsheets will leave you with some difficult, and in some cases impossible, calculations.
Give and receive encrypted payments
If you received virtual currency as payment for goods or services or used cryptocurrency to make payments, the market value at the transaction date should be used in the tax amounts.
Foreign cryptographic activities
If you've ever held cryptographic assets abroad, you should review the impact on your April deposit. The IRS has the ability to track foreign investments – including the use of court summons as it did against Coinbase to access information on its millions of account holders. It is not uncommon for cryptographers to take advantage of various platforms located within and outside the United States. For assets transferred into or out of foreign currencies, you may be required to submit Form 8938, Statement of Specified Foreign Financial Assets.
Any Coinbase account holder who has not declared their transactions should follow this same advice. The authorities are likely to show sympathy to those who make voluntary disclosures and take steps to mitigate their oversights. It may still be possible to change the past tax returns or return the missed results.
The need for a blockchain accounting software
A common thread goes through this article: the need to track every encryption operation. Blockchain accounting software is able to calculate gains and losses and whether a gain is short or long term. The right software can also calculate the cost basis for each digital currency transaction, so as not to underestimate or overprint the taxes.
At the moment, cryptographic tax laws are foggy. It is important to keep your business as clear as possible until the cloud rises.
Regarding the authors
Sean Ryan and Perry Woodin, are the founders of NODE40. NODE40 Balance is a robust cryptocurrency reporting software that integrates directly with the main cryptocurrency exchanges. Members of the blockchain community who transact, trade, or extract digital currency have probably triggered a taxable event and may not know how to properly disclose these transactions to the government.
