Claiming Cryptocurrency On Your TaxesClaiming Cryptocurrency On Your Taxes

It’s important to know before reading this article what cryptocurrencies are. Cryptocurrencies are digital currencies that exist only online and is a complex system that’s decentralized and isn’t controlled by any authority. Computer processors are used to solve complex algorithms which generate coins. All coin transactions are chained to each other, adding a block for each transaction making it impossible to erase or alter any information without breaking the entire chain. Crypto markets are the most secure for services and trade without the risk of fraud or chargebacks.

One of the biggest market explosions for cryptocurrencies in 2017 is Bitcoin. In 2017 alone, prices for one bitcoin has skyrocketed from $800 to a whopping $7,300! Rewind to 2013, the price for one was less than $10! There’s a huge profit margin with Bitcoin, and other cryptocurrencies such as Litecoin and Ethereum are slowing making a name for themselves as well.

However, bitcoin and other cryptocurrencies still are taxable, and the IRS still wants its share of the exponentially rising market. In 2014, the IRS issued Notice 2014-21, which gave them the power to impose taxes on virtual currencies. Last year in 2016, the IRS gave Coinbase - one of the largest coin exchanges globally - a “John Doe” summons to report everyone that’s used their exchange dating back to 2013, and recognized less than 900 of all investors have reported capital gains or losses. That’s something for all of us invested in digital currency to worry about, as this year the IRS hired Chainalysis - a company capable of identifying owners of digital wallets - and they’re ready to crack down on those profiting off the digital market.

How to Report Your Digital Coin Wallet

So how are you to report your taxes on digital currency? It’s important to know your coin exchange service won’t help much with tax reporting. Blockchains which chronologically record all cryptocurrency transactions aren’t so great at generating online tax reports. In addition, digital currencies don’t fall under “covered security” in the tax code, so you can’t use a Form 1099-B like you would with traditional stock trades.

Presently, there are trade accounting solutions that are entirely about cryptocurrency. Bitcoin.Tax and CoinTracking.Info are making it easy for coin users to report their gains and losses to the IRS. Most digital coin markets, such as Coinbase, make it possible to export all transactions into a readable solution such as a spreadsheet or PDF which you and your tax accountant can use to fill out Form 8949. Submit this form, along with all other tax documents, when tax season rolls around at the beginning of next year.

Here’s a few more things to keep in mind when reporting cryptocurrencies to the IRS for the upcoming tax season. The dollar value of your digital coins at the time of you filling out your tax forms is what the IRS will accept as fair market value. If you’re a ‘miner’ of Bitcoin or other digital currencies and sell them on a coin market, it’s constituted as a trade or business and the IRS will subject you to self-employment tax. If this year is the first year that you are reporting your digital currency transactions, you may want to amend past year’s tax returns to keep up with the IRS and avoid civil penalties in the future.

by Lauri Pitcher
References and Bibliography

At Lucia CPA our certified public accountants can help you organize your books and transactions for the year, write down your digital currency exchanges and promptly submit your tax documents to the IRS.

For more information about taxes on digital currency, or to talk about our tax services, contact us online!

Rated:NR/0 Votes
2 Views
Add To My Article Reading List
Add To My Article Reading List
Print Article
Print
More Article By Lauri Pitcher
More Article by Lauri Pitcher
Share
More Articles From Taxes
More Articles From Taxes
Related Articles and Readings
Top 3 cryptocurrencies to invest By: Anshul Jain
The world of crypto moves very fast. In the past 8 years, Bitcoin has surpassed all other investments such as gold, stock market or real estate. In recent years, hundreds of new cryptos have arrived on the market. Most of them are just cat or just a few features that make them different. ...
BitCoin Value - What Is It? By: PTC BitCoin Success Blog
What is the actual value of BitCoins To understand the BitCoin value, we need to first understand the true meaning of the word "value" - since everyone considers the value of an ...
BitCoin Price - History and Future Trends By: PTC BitCoin Success Blog
When BitCoins were first released in early 2009, there was no price associated with BitCoins since there were no existing currencies that could be directly exchanged for them A number of early adopters began getting involved in BitCoins since they ...
BitCoin Halving - How it Affects BitCoin Price By: Richard Bradley
We will soon be upon the BitCoin Halving Event There is allot of speculation going around about the significance of this event and how it affects the price of ...
What Affects the Bitcoin Price? By: PTC BitCoin Success Blog
Before we go into the details as to what affects the BitCoin price, we need to clarify some definitions first The BitCoin Price and the BitCoin value are not related to each ...
The information provided in this article and/or the comments is the sole responsibility of their respective authors and does not necessarily reflect the opinion of ezinepost.com. ezinepost.com  does not endorse any article and/or comments published by our web users unless otherwise noted. 

Member Panel

login to submit articles and more

StatisticsEZINEPOST.COM

  • » Active Categories: 419
  • » Active Articles:251639
  • » Active Authors:31576
  • » Active Members: 25144
  • » Statistics Updated:
    - Tue Jul 11th, 2017 03:00PM EST