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It’s April 2019 Most Common Questions Bitcoin Users Have Regarding Cryptocurrency
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It’s April 2019 Most Common Questions Bitcoin Users Have Regarding Cryptocurrency and Taxes

Many crypto investors today are full of common misconceptions that might actually end up affecting them in an adverse manner later down the line. For example, a lot of people are still under the impression that crypto assets are not taxable and thus can be used to circumvent the existing income tax laws of different countries. This could not be further from the truth since cryptocurrencies in the United States are treated as taxable objects by the IRS— much like other commodities such as stocks, bonds, real estate and gold.

Questions Bitcoin Users Have Regarding Crypto and Taxes

So without any further ado, let’s take a look at some of the most common questions that crypto holders seem to have these days.

1) Which is the Easiest and Best Way For a Person to Calculate His/Her Crypto Gains and Losses?

The most hassle free way of calculating one’s capital gains and losses (on one’s crypto transactions) is by making use of the following mathematical formula:

Fair Market Value – Cost Basis = Capital Gain / Loss

Here, the ‘Fair Market Value’ represents the value of an asset in an open market, whereas the ‘Cost Basis’ quotient is the “original value of an asset for tax purposes”.

2) What Do I Do With My 1099-K Form?

For those of our readers who might not be aware of what 1099-K is, it is essentially a form that allows investors to report “credit card transactions/ third-party network payments” that they have received over the course of a full financial year.

However, it should be remembered that this particular document does not need to be attached to one’s tax returns.

In addition to this, 1099-K forms that are obtained from crypto exchanges are meant to be used by a person to report “the total dollar amount of transactions” that have taken place from his/her linked account.

For a person to accurately report their crypto taxes, they need to record their crypto activity across all of their used exchange platforms using a 8949 form.

3) Is it Possible to Save More Money on One’s Taxes if an Individual Has Lost Money Trading Alt-
Assets?

YES, one can save additional money if they can prove that their monetary losses have been incurred due to crypto trading. However, we should also bear in mind that these losses “can and should be used to offset other capital gains as well as up to $3,000 in ordinary income”.

4) Since Crypto Provides Me With Such a High Level of Privacy, Do i Really Need to Declare my Holdings?

The IRS has made it abundantly clear that this year it will be looking at matters related to the crypto space “very seriously”. As a result of this, if a person is in fact audited, it will be their responsibility to prove that they have handled their money (both fiat and crypto) in a way that has been duly outlined in their tax return form.

5) When Does a Person Owe Taxes on Their Crypto Holdings?

According to the guidelines published by the IRS a few years back, the regulatory body has made it quite clear as to what it considers to be a “taxable event” (for cryptocurrencies).
  • Trading cryptocurrencies in place of fiat assets.

  • Trading a cryptocurrency for another cryptocurrency.

  • Using cryptocurrency procuring a range of goods or services.

6) Since Crypto Assets are So Volatile in Nature, What Value Should be Reported in One’s IRS Submission?

Wages obtained in the form of crypto assets need to be declared in line with the value of the particular asset at the time of its procuration.

7) Will the Average Person Really be Audited for Their Crypto Gains?

While there is no definitive answer for a question like this, it should be remembered that over the course of the past year or so the IRS has made it abundantly clear that it will be focusing heavily on the “taxation of virtual currencies” this filing season. So it is best to stay on the correct side of the road and do things in line with the law.

Other Key Things To Consider
  • For people who have not accurately declared their crypto trades from previous years, they need to go and amend their prior tax returns so as to accurately represent their profits/losses.

  • Employers paying their workers in crypto also need to disclose these transactions so as to avoid any income tax related difficulties in the future.


source https://bitcoinexchangeguide.com/its-apr...and-taxes/
by Shiraz J
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