If you are a heavy crypto user, you might dread filing your taxes. Crypto investments can make taxes substantially more challenging because your transactions are likely to be scattered across a broad range of platforms. It's important to keep track of each crypto transaction and to also work with a crypto tax attorney.
How Cryptocurrencies are Taxed
Cryptocurrencies are classified as property. Therefore, a cryptocurrency will only affect your taxes if you are buying or selling it. If you simply hold cryptocurrency, you won't have to pay taxes until it's you no longer want to hold onto it. This is convenient because cryptocurrencies go up and down in value.
However, if you receive a cryptocurrency as a form of income, such as if someone chooses to pay you using a cryptocurrency, you must report it as income.
Include Your Entire Crypto History
You might be surprised to find out that you will need to include your entire history of crypto investments when doing your taxes. This is because you must include the data related to the initial purchase of a crypto asset before you and your tax attorney can properly do your taxes.
It's important to keep track of all the exchanges you have used when trading cryptocurrencies. You must include the data for all of these exchanges when paying taxes.
Be Careful When Performing Calculations
The calculations that you are required to do when you have cryptocurrency investments can be much higher than with other types of investments. If you make any mistakes when you are performing calculations, you might end up being forced to pay more than you would otherwise. Therefore, it's best to have your crypto taxes handled by a legal professional.
Work with a Crypto Tax Attorney
If you are working with a crypto tax attorney, you may be able to avoid several consequences. You will be less likely to be forced to pay expensive fines and you will also be less likely to face audits. Therefore, it's always a good idea to work closely with an experienced crypto tax attorney.
However, if you do make mistakes with your taxes and are potentially facing penalties, an attorney will be able to help you. For example, if you end up owing more taxes than you can afford to pay, your attorney might be able to work out an agreement that will allow you to more easily pay back the taxes you owe.Share
27 July 2022
When I started my first small business, I had no idea how much I really didn’t know. I was fully prepared to deal with customers, sell product and even handle complaints and returns. What I wasn’t aware of was that there is so much more to it. I was lacking the legal expertise to protect the company and myself. I wanted others to benefit from my experience, mistakes and lessons learned, so I started this blog. From employment law to the legal business contracts you’ll have to sign when you form partnerships, business law is complex. I hope that the information here will help you to be better prepared when you start your business so that you’ll know when you need to call an attorney and when you can handle things yourself.