Crypto tax mistakes occur for a variety of reasons.
In my day-to-day work as a Cryptocurrency tax accountant, I see the following issues…
Miscalculations of capital gain/loss are common among non-tax professionals when analyzing transactions without the proper methods.
- A person could end up having a higher tax liability due to complex calculations done incorrectly.
- An individual could make Crypto tax errors due to NOT understanding the IRS rules or the tax code.
- Not understanding Crypto taxation may result submitting facts incorrectly in Turbo Tax.
First, recognizing what transactions that are tax-reportable and how to correctly report them can prove tricky if you’re doing this by yourself. If you own/manage a crypto trading, mining, or related crypto company with tens of thousands of transactions figuring it out by ‘trial and error’ can easily lead to Cryptocurrency tax mistakes.
Questions arise like: Should I take the deduction or apply the tax law to this situation and risk an audit or am I failing to legally apply the IRS rules to my situation and therefore pay more than I’m legally required?
- Many Crypto tax mistakes that could lead to IRS penalties and audits occur every day.
- Failing to take all deductions and laws in the tax code to reduce your taxes is a big tax mistake.
Don’t let the fear of the IRS push you to pay more than you’re required. However, your tax reporting and filing can’t be done by guess work.
Crypto errors on a tax return are not only made by individual taxpayers reconciling hundreds or thousands of crypto transactions for gain/losses. Each week, I see my client’s former CPA or tax preparer didn’t even fill out basic IRS tax forms correctly for Crypto transactions capital gains and losses. (That’s incredibly sad because their clients paid good money and put their faith into that preparer that they knew what they were doing and would work in their best interests.)
In reviewing taxpayer’s crypto returns each week, I find nearly half of the amended returns have errors from the clients former CPA or tax preparer (who is not skilled or knowledgeable in crypto tax).
This process of reviewing crypto returns for errors and legal compliance can result in a Crypto tax cut or enable a taxpayer to get a loss that they can carry forward which will reduce taxes on income this year or next year. — It’s all about doing your Crypto transaction accounting, tax planning and tax returns accurately/ correctly per the IRS tax code and done most favorably for you.
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