Cryptocurrency Tax Reporting Services
Zelin & Associates has hands on experience working with many clients that engage in crypto currency investing and trading. Our experience in this space can help eliminate the guess work of how to comply with current IRS requirements. Reporting crypto currency transactions is filled with many considerations. Zelin & Associates LLC has the expertise to advise its clients about the taxability of all cryptocurrency transactions.
Cryptocurrencies can be acquired and used for a variety of purposes. Some people mine it, earning cryptocurrencies by solving cryptographic equations using high-powered computers, while others use it to buy goods and services, and still others invest in it to profit from bitcoin appreciation, or a mix of these possibilities. Whatever the case may be, it is critical to recognize that such transactions may generate “income,” which may be subject to taxation.
While the Income-tax Act of 1961 (the Act) does not provide particular guidance or tax provisions on cryptos, one could conclude from general principles of taxation and tax transactions based on the purpose for which they are used to report gains and losses in the income tax return (ITR). It’s important to bear in mind that failing to declare cryptocurrency transactions on one’s ITR might result in penalties, and in some situations, prosecution. In fact, the IRS recently updated the Form 1040 so that the question about virtual currency is right under your name on page 1.
Taxability under personal income/capital gains
Taxability as capital gains: If cryptos are held as investments, the profit or loss on a sale could be argued to be taxable as capital gains or losses. If the cryptos are kept for more than 12 months, the gain may be considered long-term capital gains. Otherwise, they may be treated as short-term capital gains and liable to personal taxation at ordinary income tax rates.
Taxability as personal income: If cryptos are kept as stock-in-trade, they may be subject to business income taxation. The profit (net of expenses such as crypto buying costs, depreciation on computers/laptops, wages, renting expense, cost of account maintenance, and so on) from such trading activity could be taxed as personal income.
ONLINE TAX PREP SOFTWARE
Depending on your situation, we can create a report of your transactions for you if they are low in number. However, if you have a great number of transactions we recommend using an online service that can compute your gains and losses. The following resources listed below should enable you to connect to your brokerage and download your transactions.
Contact us for Advice
Worried about crypto taxes? Schedule a free appointment and get guidance.