The cryptocurrency tax regulations are now being implemented at quite a steady space. The governments of various countries have been trying their best to educate its citizens about cryptocurrency tax and its filing. However, with a lot of technical education, a lot of information and main points are missed and not attended to.
Here are the 4 things you should be knowing about cryptocurrency tax.
1. You are responsible for reporting yourself.
Tax researcher Janna Herron says that under normal circumstances, a brokerage company or bank entity will send you your 1099 tax form, but you won’t be receiving one for cryptocurrency.
Additionally, Coinbase will only issue a statement if you transacted $20,000 or more, and made at least 200 transactions. It’s your responsibility to determine your cryptocurrency tax obligations and resolve them.
2. Cryptocurrencies are more likely to be treated as Property assets rather than currency
The IRS has determined that cryptoassets are not currencies, but rather, property. Therefore, your transactions will be handled as real estate or stocks, meaning you will only have to pay taxes if you attained gains, and can deduct from your taxes if you experienced any losses.
If you need to track your cost basis in order to file your taxes accurately. For this, we recommend collecting information such as the date on which you bought each crypto asset, the price you paid, the date you sold it, and how much you received for them.
Websites like Bitcoin.tax or Cointracking.info can be used for making this calculation easier, and also for getting some instructions on how to file Schedule D (Form 1040) correctly.
3. Hiding Trades May Harm You Eventually
The idea of hiding your trades from the Internal Revenue Service is never endorsed. Even if you don’t inform them of your transactions, they may discover them later and, of course, apply penalties under the law.
That being said, some of you may think that regulations are off the table for now, so it might be an easy way of escape but the agency may still apply some penalties if it’s considered necessary.
Some of the penalties include prison for a term of up to 5 years, and a fine of up to $250,000.
4. It is Important to Register Every Transaction You Make
Every time you make a trade with cryptocurrencies, remember to log it, as you don’t want to be worried later about looking for receipts and emails in order to get valuable information related to your activities.
Moreover, every time you make a taxable trade, it is essential that you set aside some money. Nobody will remind you of that, but if you do it, besides being completely responsible for your taxes, you will also have an smooth cryptocurrency tax filing experience.
These 4 relevant points, if taken care of, will help you evade the tax filing woes.