Do you know how Crypto gains are taxed? – Failure to have basic knowledge in how much tax you pay on Crypto gains can result in paying more taxes.
You can always search online for Crypto tax accountant near me or Crypto CPA, so you don’t have to research to Cryptocurrency gains are taxed. Most Crypto tax help topics take an enormous amount of time to learn about and become proficient. Using the assistance of tax professional can save you a lot of time and help you avoid costly mistakes.
This is the 3rd video in the Top 8 Crypto Tax problems series. Be sure to all the videos in this series in order to extract the piece of information that will help you solve your greatest Cryptocurrency tax challenges. Links to all videos can be found below.
My name is Mark Robert, Crypto tax accountant and advisor. This article is part 2 of a 8-part series called “Top 8 Crypto Tax Problems.” You’ll see, I draw from my 5 years of cryptocurrency tax and accounting experience helping over 1,137 thousand virtual currency clients during my 17 years as professional personal and business accountant.
To determine how much tax you pay on Crypto gains, you must know:
- Virtual currency taxation is a complicated area, and many areas of the Tax code are not straightforward at all.
- Crypto tax Issues like the tax treatment of forks, air drops, NFTS and their respective characterization, basis, recognition of income, etc. are up for debate even among CPAs.
- If you have a mining business, there are even more complexities to iron out if you want to ensure you’re in compliance and only pay what you legally required to.
Unfortunately, in learning about how Crypto gains are taxed there’s a multitude of misleading and even dangerous tax advice flooding the internet and YouTube. This information normally comes from among amateur enthusiasts or with people who have something to sell you.
One recent article on Forbes discussed how you could do a 1031 exchange with cryptocurrency. Following such advice in learning how Crypto gains are taxed could get you in deep trouble with the IRS. It could lead to huge understatement of tax penalties that could wipe out your bottom line especially if you’re a Crypto Trader, Miner or have another Crypto related business.
You must keep up to date on tax law if you’re doing all the accounting and tax compliance yourself. IRS tax law changes on average one time per day. That means there’s a new tax law or tax law change occurring approximately 365 times per year.
Applying the tax code to calculate how much tax you pay on Crypto gains, it requires:
- To evaluate, analyze and synthesize various aspect of the tax code to make proper tax decisions.
- This requires a good amount of experience and a broad foundation of the tax code and expertise in Cryptocurrency.
- Even simple questions in vague areas of the tax code pertaining to cryptocurrency may require research time into: “what was congresses intent?”
Your crypto tax accounting and tax reporting must meet “Reasonable Basis” or substantial authority per IRS standards to ensure you aren’t filing a frivolous or fraudulent tax return.
To establish Substantial Authority standard, it must meet the following IRS criteria:
1.) Applicable provisions of the Internal Revenue Code
2.) Proposed and final regulations construing such statues
3.) Revenue rulings and procedures
4.) Treasuring Dept and other official explanations
5.) Tax court cases
So, a Forbes article written by a CPA with lack of knowledge of Crypto tax and accounting would hardly meet IRS standards for an untested application of the tax code. Any IRS agent in an audit would laugh at that notion that you “read an article on Forbes or watched a YouTube video of a cryptocurrency guru.”
Obviously, you can’t rely on information about how much is the tax on Crypto gains and how to reduce those taxes from non-Crypto tax accountants or CPAs.
Unless your crypto activity is simplistic and cookie-cutter situation meaning only a few straightforward transactions on one exchange, it may require the help of someone trained and experienced in Crypto taxation to keep you out of trouble or for you to invest the time to learn all the ins and outs yourself.
You probably want to reduce your Crypto gains tax, but remember this. Even if you don’t know or understand all the tax laws to and requirements to stay in compliance, you’ll still be held responsible for failing comply and follow all tax reporting and filing requirements.
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