What You Don’t Know About Crypto Taxes Can Hurt You

Bitcoin hokey Pokey

Crypto taxes are something to worry about if you are a trader of cryptocurrency. The taxes are
calculated maintaining several parameters like the number of coins and trades and exchanges
that you have made. This process consumes a lot of time and there are many things that need
to be known about the crypto taxes.

Cryptocurrency tax software is something that helps you to effectively calculate the amount of
the taxes in case of being a trader for the cryptocurrency. Here, you will know about some facts
about the crypto taxes which you might have overlooked all these days. As an investor of the
crypto, you should always stay in good connection with the tax advisor. He might be helpful to
guide you through the process of calculating the tax and help you to avoid various
abnormalities regarding tax payments.

The cryptocurrency tax laws

There is a cryptocurrency law which has seen no change since 2014. As a trader, it is your job to
know about all the laws and the scopes. In the real scenario, you will face a lot of confusion
about the taxes on the cryptocurrency on not knowing the taxation laws. You should always
remember that it is vital to understand the implications of the tax gains in a given year.

Some mostly Known facts about the tax session

Everyone is knowledgeable about the ‘realized’ taxable losses and gains when they are the
cryptocurrency.

On buying 2 bitcoins for approximately $4000 in August and selling one in the month of
December for $14000 gives you a realized gain of $10000. You will be able to have a realized
gain easily. The gain is denoted as a normal income and taxed accordingly as you have held it
for less than a year.

The withdrawal of the funds is not needed in case of the gains to become taxable. You can owe
the gain as the sales easily proceed over to the USD wallet that is coin base.

You must always remember that the exchange process of one coin with another is an event that
demands taxes. On selling one bitcoin of $4000 approx for 20 litecoins having $400 coin basis
you can have a total realized gain of $4000 but it might seem that you have sold the bitcoin
worth $8000 in USD.

According to the experts, it is easier to report and track the normal traditional gains of
investment but in the case of cryptocurrency it can be confusing. This is because the trading
between one and another coin the losses and gains are needed to the reported in details.

You can use the crypto tax calculator that is provided by the set of the leading software for the
reporting of the taxes. Importing the trading data will be easier with the help of tax software.

Facts about crypto taxes that some people know

In the case of cryptocurrency you must know that selling and spending the crypto is just the
same. All the donations of the cryptocurrency are deductible. You get the opportunity to
deduct the major sum upon the market value avoiding the payment of the tax for the gain that
you have made. In case of dealing with the Bitcoin and Crypto taxes, this is a vital thing that you must
know.

Facts that very few people know

As the IRS has no prescribed guidance for the calculation of the cost basis for the losses and gains on the cryptocurrency Due to this reason, the cryptocurrency is treated the same as security. The Last In, First Out method and the Average Cost method are to conventional ways to calculate the accounting of crypto. On choosing the FIFO (First In, First Out) you might experience an increased tax bill. According to legitimate sources, the same happens with the people who sold or bought the crypto in a given year.

Internal Revenue Service

On choosing the Average Cost or the LIMO method the chances of the under-reporting of the
tax liability in a given year might happen. You can face this situation. You must, however,
choose the FIFO because the IRS might need the records for it in the future. A crypto trader
should always know these jargons.

Important Facts that everyone should know

There are certain things that you have to keep in mind while knowing the aspect of crypto
taxes. They are.
● The tax audits for cryptocurrency always has coverage of three years
● The rules from the IRS can come in retroactive action
● New IRS guidance can be put into action in a certain point of time
● Try making decisions that are right as wrong decisions can hurt you in the future.
● You should not be a subject of under-reporting of the taxes. Criminal charges can be
imposed on you while doing that.
● You must always try to have a clear note on all the transaction and taxes you have
made with the cryptocurrency.
● Take the help of a professional and the digital support of a cryptocurrency trading
software wherever useful.

So, you should go through all these facts in case of dealing with taxation on the cryptocurrency.
You should maintain proper decorum while dealing with the digital currencies because any
outlaw can lead you to drastic legal proceedings. Even if you are a trader or an investor, always
try to connect with the tax professionals. The tax experts suggest you the right way to avoid any
nuisance.

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