Crypto Updates

What crypto hodlers should keep in mind as tax season approaches

What crypto hodlers should keep in mind as tax season approaches

Filing taxes for cryptocurrency can be a confusing and daunting task for many individuals. The United States Internal Revenue Service (IRS) treats cryptocurrency as property subject to capital gains taxes. Knowing this appears to make filing crypto taxes simple, but crypto’s unique nature means there are many unanswered questions.

Accurately reporting gains and losses can be a nightmare. While everyone concerned about tax season knows that keeping accurate records of every crypto transaction is a must, there are other things to keep in mind.

There is a difference between short-term and long-term capital gains taxes, with tax rates varying depending on multiple factors. These capital gains tax rates are available online and are beyond the scope of this article, which will focus on avoiding potential issues with the IRS while filing taxes on crypto.

How to report crypto taxes

Filing cryptocurrency taxes isn’t a choice; it’s an obligation that every individual and business has. Those who keep track of their transactions — including the prices of the cryptocurrencies they transact — will have an easier time reporting their activities.

Even those who haven’t received any tax documents associated with their cryptocurrency movements may have taxable events to report. Speaking to Cointelegraph, Lawrence Zlatkin, vice president of tax at Nasdaq-listed cryptocurrency exchange Coinbase, said:

“Crypto assets are treated as property for U.S. tax purposes, and taxpayers should report gains and losses when there is a sale, exchange, or change in ownership (other than a gift). Merely HODLing or transfers of crypto between a taxpayer’s wallets are not taxable events.”

Zlatkin added that more advanced trading “where there is a change in economic ownership, literally or substantively, may be taxable,” even if the taxpayer doesn’t receive an IRS Form 1099, which refers to miscellaneous income.

Meanwhile, Danny Talwar, head of tax at crypto tax calculator Koinly, told Cointelegraph that investors can report cryptocurrency gains and losses through Form 8949 and Scheduled D of Form 1040.

IRS building in Washington D.C. Source: Joshua Doubek

Talwar said that investors with cryptocurrency losses after last year’s bear market might be able to save on current or future tax bills through tax loss harvesting.

Tax loss harvesting refers to the timely selling of securities at a loss in a bid to offset the amount of capital gains tax that would be payable on the sale of…

Click Here to Read the Full Original Article at News…