Tax season is upon us, cryptocurrency investors are expected to possess records of their purchases, trades, and sales to the finest detail.
Sadly, the tax filing procedure for crypto assets is even more convoluted than that for regular assets and is dreaded by those who have to take the pain of getting through this process.
Chief Executive Officer of ZenLedger, the crypto-taxing application, Pat Larson expressed that when it comes to tax laws, Crypto assets are the most difficult to handle when it comes to Tax payments. Users are required to keep a track of their activities throughout the year for this purpose and so, having the right documentation for your token portfolio is quite helpful.
The government penalizes anyone who fails to comply with the complex process of tax filing accurately. The irony is, that the employees of the Internal Revenue Services, who helped structure the regulations surrounding tax filing cannot clearly explain them either, maybe for a lack of understanding.
The Internal Revenue Service (IRS) issued a public service notice on Twitter reminding filers of the deadline and the penalties they may have to face in they fail to file within the deadline.
To avoid the late-filing penalty be sure to file an #IRS return or request an extension, even if you can’t pay the full amount owed. See: https://t.co/3byJqk9fiF #IRSFreeFile pic.twitter.com/Bf5abuJO8I
— IRS (@IRSnews) April 4, 2019
During a webinar that was held in the first week of April, Larson, who is a tax attorney specializing in digital currency, pointed out a couple of cases that are taxable. These include selling of crypto for other cryptocurrencies, crypto for fiat, exchanging cryptocurrency for any service or product, mining, airdrops, and fork income.
He also helped identify non-taxable cases, like using crypto to buy fiat, transfer of crypto among digital wallets and giving someone up to ten thousand dollars-worth ($10,000) of crypto.
However, the following are non-taxable events: the purchase of crypto with fiat; transferring coins between wallets; and gifting up to $10,000 equivalent per recipient. Users can also gain tax benefits when funding tax-favored IRA accounts. Cryptocurrency is viewed more as stock than as a currency.