One of the annual traditions the American people hate the most is having to file their taxes. Fortunately, if you know what you’re doing, it makes the whole process slightly less irksome. So today we’ll be discussing everything you need to know about bitcoin and taxes to ensure you don’t have any unnecessary entanglements with the IRS. Apparently, despite it being classified as a virtual currency, the IRS does still treat bitcoin as if it were a tangible possession. The bad news is the internal revenue service doesn’t offer much in the way of guidance when it comes to paying taxes on any bitcoin you may possess. The good news is they’re more than happy to help with any questions you may have regarding the process.
When it comes to people who may have filed their taxes incorrectly, they go a lot easier on those who come forward and take responsibility for their mistakes as opposed to the taxpayers who are later discovered to have filed their taxes inaccurately. It’s important to remember that, while bitcoin may be hogging all the spotlight these days, it is not the only existing type of cryptocurrency out there. There are also air drops, mining coins and many other kinds of virtual currency. Although being able to classify your cryptocurrency into a certain category would be more convenient, you’ll most likely have to use the first-in-first-out treatment.
The important thing to remember is, if you hold out for more than a year, you’ll be able to pay taxes at a reduced rate. Depending on what tax bracket you’re in, you could save up to 24% on your taxes. And of course, it’s essential that you keep a record of every financial transaction you have made over the past year. This way you’ll be able to account for every single cent that you spent. This also includes crypto transactions as well. These records should include the date of purchase, the market value at that particular date, and proceeds for when a particular coin is bought. This will help you calculate the cost basis for each purchase that you made. This should also include any exchanges or sales you may have made.
Finally, the most important thing to remember is there are an abundance of services and software out there that can help make the tax filing process much simpler and easier for you. You can use TurboTax, H&R Block, Tax Act Premium, Tax Slayer, Liberty Tax, Credit Karama or Jackson Hewitt Premium. These will help you to ensure you have filed your taxes properly and help take the stress off of you. And when in doubt, you can always call up the IRS to ask them about any questions you may have. They’ll do their very best to assist you with any issues you may be having. And, most importantly, don’t put off taxes until the last minute or else you’ll most likely get audited. But if you follow these steps, that shouldn’t happen.
Glasscrypto is a blog for all your latest cryptocurrency and blockchain news and advice!