Crypto Taxation
> Crypto Taxation
Crypto Taxation
So, you finally decided to invest in crypto assets (i.e., Bitcoin, Ethereum, Cardano, Solana, etc.) and you converted from one coin to another? Be aware, that will trigger a gain/loss that must be reported on your tax return. This common scenario is what most taxpayers are not aware of.
The IRS is now monitoring compliance with crypto transactions – including conversion of crypto assets. One of the key questions on the 1040 relate to whether you purchased, owned, sold, or were gifted crypto assets. Although, crypto assets are not subject to wash sale rules or 1099 reporting, the tax laws are constantly changing to ensure the IRS keeps abreast on the gains/loss of crypto assets.
If an employee received payment with digital assets, the digital assets are wages. Similarly, if they worked as an independent contractor and were paid with digital assets, they must report that income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). Schedule C is also used by anyone who sold, exchanged or transferred digital assets to customers in connection with a trade or business. Below are some common questions that we can help with:
- What are the tax consequences if I receive crypto as payment for services?
- What are the tax consequences of converting your crypto assets from one coin to another?
- How do I track my basis of crypto assets?
- If I did not report my crypto gains in prior years, will the IRS penalize me for underreporting?
- What can I do to reduce my taxes on capital gains associated with crypto assets?
- If I sell my and buy the same coin within 30 days, does the wash sale rules apply?