Cryptocurrency

If you invested in cryptocurrencies and sold, exchanged, or spent it in 2017, you have to report a capital gain or loss on each transaction, including coin-to-currency sales, coin-to-coin trades, and purchases of goods or services using a coin. Deduct coin fees and other expenses appropriately. Tax and accounting content on cryptocurrency trading is covered in Chapter 18 of Green’s 2018 Trader Tax Guide.

AICPA Updated Comments to IRS on Notice 2014-21: Virtual Currency Guidance. (May 30, 2018)
Our Darren Neuschwander CPA was on the AICPA Virtual Currency Task Force that drafted this recommendation letter to the IRS. Robert Green asked Darren Neuschwander if this new AICPA letter takes a tax position that is different from our existing content below. “Basically, nothing has changed in our current positions. Open questions remain open and that is the main reason for the letter to request specific guidance from the IRS/Treasury,” says Neuschwander.

Blog posts:

Hope For Active Crypto Traders With Massive Losses. (June 16, 2018)
The AICPA asked the IRS to permit cryptocurrency traders, eligible for trader tax status (TTS), to use a Section 475 MTM election for ordinary gain or loss treatment. Many crypto traders have significant losses in 2018 and they want to avoid the $3,000 capital loss limitation.

Spending Crypto For Personal Use Can Be A Tax Mistake. (June 4, 2018)
If a taxpayer purchases virtual currency (cryptocurrency) and spends it on personal use, the IRS requires him to calculate a capital gain or loss on each transaction. Capital gains on personal-use property are reportable and subject to tax, whereas, the IRS disallows capital losses. The AICPA recently asked the IRS for some equitable relief by adopting a “de minimus election,” which provides a $200 threshold for excluding capital gains income on personal transactions.

Accounting Method Impacts Crypto Income Taxes. (April 10, 2018)
Many crypto traders face massive tax bills for 2017. Which accounting method they apply could change their tax bills by tens of thousands of dollars.

Cryptocurrencies: Trader Tax Status Benefits And Section 475 Issues. (March 14, 2018)
Active cryptocurrency (coin) traders can qualify for trader tax status (TTS) to deduct trading business expenses and home-office deductions. They may have an opportunity to use Section 475 tax loss insurance, too, but it’s a long-shot.

Cryptocurrency Traders Owe Massive Taxes For 2017. (Jan. 1, 2018)
An updated primer, including information about Coinbase tax reporting using FIFO, hard forks, and the “Tax Cuts and Jobs Act.”

How Cryptocurrency Investors Can Avert IRS Attack. (Oct. 28, 2017)
An excellent primer on cryptocurrency tax treatment, including coin-to-currency trades, coin-to-coin trades, receipt of coin in a hard fork or split transaction, purchases of goods or services using a coin, and mining income.

Cryptocurrency Traders Should Consider These Two Tax Accounting Solutions. (Oct. 28, 2017)
Cryptocurrency tax reporting is complicated and voluminous. I recommend two coin accounting solutions: Bitcoin.Tax and CoinTracking.Info.

Cryptocurrency Traders Risk IRS Trouble With Like-Kind Exchanges. (Aug. 13, 2017)
Learn why we don’t believe coin-to-coin trades qualify as Section 1031 like-kind exchanges (which means there is no taxable income deferral). (The House tax bill H.R.-1 limits Section 1031 exchanges to real property, only.)

How To Report Bitcoin Cash And Avoid IRS Trouble. (Aug. 2, 2017)
Learn how to report “hard fork” coin transactions.

If You Traded Bitcoin, You Should Report Capital Gains To The IRS. (Feb. 16, 2017)
The IRS considers cryptocurrencies, including Bitcoin, to be “intangible property.” Investors and traders holding cryptocurrency as a capital asset should use capital gain or loss tax treatment on sales and exchanges with the realization method.

If You Want To Trade Bitcoins, First Learn CFTC Rules. (Feb. 16, 2017)
The CFTC requires counterparties, including brokers and exchanges, doing business with American retail customers to register if they offer “leveraged” or “financed” financial products, including derivatives. Most coin exchanges do not offer leverage.

Bitcoin Is Not Reported On 2013 FBARs. (June 6, 2014)
Investors store Bitcoin on coin exchanges in foreign countries. Do they have to file bitcoin holdings outside the U.S. on 2013 Foreign Bank Account Reports? The IRS just said no.

Can Business Traders Apply Section 475 Elections To Bitcoin Trades? (May 21, 2014)
Section 475 applies to securities and or commodities and not intangible property like Bitcoin.

IRS Guidance On Bitcoin Transactions (Mar. 25, 2014)
Good news for taxpayers with huge gains on using, investing, or trading Bitcoin: The IRS just said Bitcoin is considered property, not a currency.

Bitcoin Is A Hot Commodity, But How Is It Taxed? (Dec. 3, 2013)
Buttressed by an Internet craze, the price of Bitcoin has skyrocketed this past year from $17 to over $1,200. While the Federal Reserve gave tacit approval, stating “virtual currencies like Bitcoin have legitimate uses and should not be banned,” the IRS has not yet issued tax guidance. Despite the lack of guidance, income from Bitcoin transactions must be reported.

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