The brave new world of cryptocurrency can be confusing, especially when the IRS comes to collect. We all know that when wealth is born, it will almost certainly be taxed in some way, shape, or form. The IRS is seeking extensive information from taxpayers concerning digital property acquisitions and transactions. To lower your cryptocurrency tax liabilities on your reporting, our experienced professionals analyze your crypto transactions to determine the character of your crypto gain or loss. We also ensure that all reporting requirements are met, preventing penalties for non-compliance.
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How is Cryptocurrency Taxed?
The IRS views cryptocurrency holdings as property. A transaction with cryptocurrency is a taxable event. Two types of tax apply to cryptocurrency: capital gains tax and income tax. In terms of tax rates, there is no clear-cut rate as it varies depending on each transaction situation.
Taxable Crypto Events:
Crypto Gains Tax
Capital gains are profits earned from buying and selling property like stocks, real estate, and crypto. If you sell a cryptocurrency for more than what you paid for it, you’ve made a capital gain. The length of which you had your crypto in possession affects the amount of your tax liability. If you hold cryptocurrencies for 12 months or less, you are liable for short-term capital gains tax; If you hold crypto for more than 12 months, you are liable for long-term capital gains tax.
Crypto Income Tax
You might receive crypto as payment instead of cash, rewards for certain activities, etc. You’ll need to record the fair market value of the crypto income as of the moment the cryptocurrency was received. Your cost basis is the fair market value of the cryptocurrency the moment you received it. Additional information can be found on the IRS webpage, you can also call us to find out more about your specific case.