tax laws

Amid vague crypto laws and insufficient guidance, millions of taxpayers run the risk of filing incorrect returns

In April 2019, an unprecedented number of U.S. citizens could be completing their tax returns with little idea of whether their filings are complying with tax laws.

mohamed_hassan / Pixabay

Millions of US citizens have invested in cryptocurrencies over the past year. Whether they’re “hodlers” (those that buy cryptocurrency to hold as an investment) or traders, their moves are subject to vague and outdated tax laws.

[REITs]

Q3 hedge fund letters, conference, scoops etc

This is hugely worrying and, frankly, an unacceptable state of affairs.

There is no sign of new guidance from the IRS ahead of April so investors and their representatives will have to exercise reasonable judgement to ensure the positions they take are defensible.

The first sensible step is to jrecord cryptocurrency investments and trading activity in as much detail as possible. This includes dates, values, and specific amounts of purchases and sales. The next step is to pay careful attention to the laws as they stand, making sensible and defensible judgements where possible.

Hard forks and airdrops (It’s not free Money)

The proper federal income tax treatment of a cryptocurrency hard fork is a particularly gray area of US tax law. After a fork, the original owner of a cryptocurrency retains their interest in the original coin and also has the right to use the forked coin. This raises a particular tax issue: Does a holder of a cryptocurrency that experiences a fork immediately realize taxable income in the eyes of the IRS?

This is an issue affecting many investors. Bitcoin, for example, forked several times in 2017, and again in just the past few weeks.The Bitcoin Cash fork that resulted in Bitcoin Cash ABC and Bitcoin SV alone effectively doubled every holder’s amount of Bitcoin Cash digital currency.

Despite calls from various parties – from tax experts to US senators – the IRS is yet to offer detailed guidance beyond the 2014 memo. Amid this vacuum, some accountants and advisers are treating the value of the coins received as taxable income on the date of the fork. Yet, I along with many other experts, believe tax should be paid when investors sell the forked coins at a 100% capital gain. Demanding that individuals pay income on value they never had a voice in receiving seems against all principles of fairness, and the American Institute of Certified Public Accountants agree.

The solution? Carefully record all crypto investments and trading – be ready to demonstrate transparency when you are audited. Work with a recognized expert in the field of cryptocurrency tax, a CPA, or a legal professional specializing in crypto. Excellent tools exist to help list out trade activity and provide a detailed audit trail you can hand over to the IRS in defense of your position. You should always be able to identity each transaction as digital assets are moved from wallet to wallet or from exchange to exchange.

Cryptocurrency is property

In …read more

Source:: ValueWalk

      

(Visited 3 times, 1 visits today)
Crypto Investors Face Tax Confusion Countdown

Leave a Reply

Your email address will not be published. Required fields are marked *