[ad_1]
The cryptocurrency space is full of people who want traditional adoption, but often they can not understand how difficult it would be to use bitcoins (or any other cryptocurrency) as a daily payment method in compliance with current tax laws. Taking into account the current regulations, tax expectations and the use of cryptocurrency, the adoption of cryptocurrencies becomes a huge headache.
Crypto mainstream actually
The prospects for the future of cryptocurrency on the whole seem to be positive in terms of potential. The adoption of cryptocurrency, however, requires changes to the current regulatory framework to accommodate a new type of payment.
For the general public, the use of cryptocurrencies would not be very different from the current use of fiat currency such as USD, EUR, etc. For example, companies like grocery stores and shopping malls would probably use payment cards, but these cards would have access to cryptographic holdings rather than banking information. A CoinSutra article mentioned cards such as Wirex or Cryptopay, which function as debit cards, except that they access the participations in cryptocurrency. Buyers can use these cards anywhere they accept debit or credit cards. All fiat encryption conversion is performed on the backend by card providers, as illustrated by CoinDesk in its topic guide.
In addition, when they purchase products online, customers simply send cryptographic assets (like bitcoin, litecoin or bitcoin money) to the cryptocurrency addresses of online stores.
On a superficial level, the use of mainstream cryptocurrency seems simple. The current regulation, however, complicates the situation. Tax laws on cryptocurrency are complex, even for simple investments.
Classifying exchanges or exchanges of cryptocurrency as similar exchanges could be a manageable but controversial future solution. The Internal Revenue Service (IRS) mentioned this topic in section 1031 of the IRC code.
Whenever you sell assets or real estate investments and you earn money, you generally have to pay income taxes at the time of sale. Section 1031 of the IRC provides an exception and allows you to postpone the taxes paid on the gain if you reinvest the proceeds in similar properties as part of a qualifying exchange. "
Kind exchanges for crypts would mean allowing taxable events to be carried out only when they are sold encrypted for fiat. This means that the purchase of ethereum with bitcoin would not trigger a taxable event until the ethereum is sold in fiat. In other words, the taxation would have occurred in the face of any gain or loss deriving from the acquisition of the asset for fiat, based on how much USD had originally been invested.
That said, Cross Law Group explained that the similar model may not be applicable under current legislation.
The bottom line is that the crypto-crypto negotiations can technically qualify as type exchanges, but this qualification is at best uncertain. "
Also the implementation of similar exchanges might not be the simplest solution. Kind exchanges can be simpler in the short term, but, once people exchange encryption in fiat or make purchases, it can be difficult to evaluate and track earnings when only a fraction of the original cost base is sold in fiat. .
A student's tax encryption fight
November 2018 saw a post Reddit of a university student in difficulty on the subject of taxation related to encryption. The student invested $ 5,000 in the encrypted markets in early 2017. Through exchange and investment, the student turned $ 5,000 into $ 880,000 by the end of 2017.
Due to the 2018 crypto bear market, the student's portfolio only valued $ 125,000 at the time of his post on Reddit. He said he still has $ 400,000 in taxes for his taxable crypto-encryption events in 2017, although he said he never sold his fiat wallet.
Why are cryptographic taxes so confusing?
Monitoring and recording these events is difficult. For example, a fictitious encrypted user used Coinbase to purchase Litecoin with USD. He bought a litecoin for $ 30. Two days later, the litecoin price rose to $ 40. The user then used that litecoin to buy 133 0x chips at $ 0.30 each. He has just activated a taxable event by purchasing 0x with litecoin.
For that exchange (by purchasing 0x with litecoin), the cited encrypted user would have to register the dollar price of litecoin at the time of purchase of 0x, the price in USD of 0x at the time of purchase and the amount of litecoin spent on buy the final amount of 0x. So he or his accountant would need to calculate his net gain or loss on that event (trade).
Coinbase records large amounts of transactions and transactions for each customer, but most bags do not. Complications escalate when encrypted users store their funds in wallets or wallets like Exodus that can exchange cryptographic resources for users.
Furthermore, most cryptocurrencies can only be purchased with bitcoins. If someone wanted to buy any other cryptocurrency, he would need to buy bitcoins with fiat, send bitcoins from Coinbase to an exchange that exchanges the desired cryptocurrency and then buy that good with bitcoins there. It should therefore record all amounts, prices and other data applicable during the process of such exchanges.
The process becomes more complicated when you buy products with cryptocurrency. In another hypothetical example, a fictitious crypt wanted to buy a $ 25 hat on Amazon, paid via litecoin (assuming that Amazon would accept litecoin). Probably would have kept several objects stored somewhere, ready to be used as payment.
The encrypted user bought the hat for $ 25. He therefore had to account for the sales tax on that article. The fees in this example were $ 5 on a purchase of $ 25. The final payment amount was $ 30 for the hat, negotiated with a litecoin at $ 30 (including tax). However, it should also have taken into account all previous gains or losses up to that point.
How much total USD originally used to buy that litecoin? How much money did you buy? When did you buy it? What was the individual price of litecoin when it had bought it for the first time? What was the price of litecoin when he bought the hat? How much do you earn since you bought litecoin with USD when you used it to pay for the hat?
The hat purchased was just one example of a single purchase and even the most basic examples are complicated. Imagine if an encryption holder used 0.005 bitcoins to fill his car with $ 20 in gas. Or bought a donut for $ 2.75 with 0.083 litecoin, taking into account all of the above. Imagine taking care of five general purchases a day. Services such as Cointracking help to track exchanges, gains and losses associated with exchanges and encrypted participations. There are also other services that track and record transactions, exchanges, etc.
Although cryptography can be sent to many addresses, types of storage and different locations, complicating these services. There are a number of different aspects to consider. Each of these services often also costs money, in addition to paying an accountant to solve everything. The main point is that according to current tax regulations, the daily payment of cryptocurrencies will apparently endanger users for audits.
CoinDesk recently reported to a Japanese MP who recommended four regulatory changes to improve Japan's difficult fiscal situation. The four proposed changes included tax exemptions for crypto-crypto negotiations.
In cryptocurrency, every transaction is recorded on an online public ledger. You can develop the tools necessary to simplify this process. Although, at the moment, the world may not be ready for daily cryptographic payments, the tax laws are the same.
