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Archives for March 2018

Cryptocurrencies as Property & Why People Haven’t Been Reporting

Here at Camuso CPA, we offer cryptocurrency tax services in Charlotte. Cryptocurrencies are an exciting new currency medium that is fast gaining popularity. However, as a new monetary medium, there is a lot of grey area come tax season. The last thing any good investor wants is to be scrutinized by the IRS, and that is fast becoming a real possibility as cryptocurrencies become more mainstream. Here, we will go over why many people haven’t yet reported their cryptocurrency transactions to the IRS, and why they should.

Why haven’t people been reporting their cryptocurrencies?

According to the personal financial service Credit Karma, only about 0.04 percent (or 100 citizens out of 250,000) of United States citizens reported their cryptocurrency transactions to the IRS as of February 13. The Tax General Manager of Credit Karma, Jagjit Chawla, did not express surprise at this low number, stating that people with more convoluted tax situations (like those performing cryptocurrency transactions) generally file later in the season. However, he added that the numbers did seem low considering how mainstream cryptocurrencies have become.

Cryptocurrencies as property

Back in March of 2014, the IRS began providing some guidance for the taxation of Bitcoin, one of the most popular and mainstream cryptocurrencies. Because of these guidelines, cryptocurrencies are treated as property rather than currency. Like all taxed property, when you report cryptocurrency to the IRS, what you owe will be based off of the price you bought it at, the price you sold it at, and the change in value between when you bought and sold it. Many experts believe this is not the ideal designation for cryptocurrencies, and may even become a deterrent in their adoption. Trader Brandon Williams, for instance, told CNBC that he thought it would be better to treat cryptocurrencies as currency.

In fact, Williams also argued that the small amount of cryptocurrency traders who have filed them in their taxes is due specifically because of the difficulties of treating cryptocurrencies as property rather than currency. For instance, he states that if a person makes more than two trades a day, they can expect to spend three to four hours every two weeks just tracking gains and losses while taking into account volumes and volatility.

With such a laundry list of tasks necessary just to file taxes properly, it’s no wonder most cryptocurrency traders haven’t filed yet. However, they must file if they don’t want to be audited by the IRS. Due to the novel and complicated nature of cryptocurrencies, the best and most efficient way to ensure you have your taxes done properly is to hire a professional CPA knowledgeable about cryptocurrencies.

If you are looking for qualified crytpocurrency tax services in Charlotte, Camuso CPA can help! Please feel free to give us a call for more information about our cryptocurrency and other tax services. One of our friendly and knowledgeable representatives will be happy to answer any questions that you may have. We look forward to hearing from you!

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1099-K From Coinbase: What To Do

Here at Camuso CPA, we offer cryptocurrency tax help in Charlotte. Cryptocurrencies are a new monetary medium that are taking the world by storm, and are becoming more widely accepted each and every day. Unfortunately, come tax season, that can leave earners in the dark with how to report income from this new currency medium. That is where we come in! We have the knowledge base and experience necessary to navigate the tricky tax regulations for cryptocurrencies. For more information, feel free to give us a call. In the meantime, we’ll go over your 1099-K from Coinbase, and what to do with it.

What is a 1099-K?

A 1099-K is a form used for tax purposes to report both credit card and other third party payments that you received during the last tax year. Any third party payments made for over 20,000 dollars, or that has made 200 or more transactions, must legally be reported on a 1099-K. If you have been using the cryptocurrency market Coinbase, they should send you a 1099-K once you meet those requirements.

Your 1099-K doesn’t include all pertinent tax information. For instance, the gross amount reported does not include adjustments, gains, or losses that may need to be reported to the IRS. Put another way, the 1099-K lists the dollar amount and date of each cryptocurrency transaction. Because it only lists these totals, it cannot be used to determine how much you will need to pay in capital gains taxes.

What is I didn’t get a 1099-K from Coinbase?

If you did not meet the requirements listed above, then Coinbase did not send a 1099-K. However, this does not mean that you do not have to report your capital games come tax season. Any and all cryptocurrency investments, as well as the spending of cryptocurrencies on goods and services, are subject to taxation.

Reporting Cryptocurrency

To report cryptocurrency, you need to figure out your cost basis, which is the amount you paid for the cryptocurrency when you purchased it. Like almost all capital assets, the tax rate depends both on the price you acquired and sold your cryptocurrency for, but also the time that elapsed between buying and selling, and the changes in the cryptocurrency value during that time. While some investors do try to do their own cryptocurrency taxes, the regulations are still being worked on, and are constantly changing. This can create problems with your taxes, and nobody wants to deal with problems when it comes to the IRS. Instead, you can hire out to a professional CPA who specializes in cryptocurrencies, like you’ll find here at Camuso CPA.

Want cryptocurrency tax help in Charlotte? We can help! Please feel free to give us a call at your earliest convenience for more information about how our tax services can benefit you. We offer many other CPA services for you to take advantage of as well. One of our friendly and knowledgeable representatives will be happy to answer any questions that you may have.

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Cryptocurrency Tax Returns: Should You Prepare Your Own?

Many people have reaped some serious rewards from their cryptocurrency investments. It’s a lucrative new monetary medium that many people are getting behind. But because it is new, it becomes harder to navigate when tax season comes around. Taxes can be hard enough to understand when you are dealing with normal income, and many people end up leaving money on the table. Mistakes become much more likely when dealing with cryptocurrencies, so we make the argument that filing cryptocurrency tax returns should be left up to the professionals. Here’s why.

It’s going mainstream

Cryptocurrencies, especially the big ones like Bitcoin, are becoming more mainstream than ever. That means that the IRS is cracking down on them come tax season. While many have been able to under report their virtual currency assets in the past, this practice is fast becoming inviable. In fact, the IRS has recently filed a suit in court against Coinbase, which is one of the largest cyrpto exchanges in the United States, in order to find information on potential tax evaders. This is not a good time to be making mistakes on cryptocurrency tax returns.

Professionals are knowledgeable

Cryptocurrencies are in an unusual middle ground where the IRS is now cracking down on them, but even many licensed CPAs are struggling to understand the new tax law. So, to navigate, it’s important to not only find a professional in tax law, but one who is current on cryptocurrency tax law as well. Here at Camuso CPA, we have all the knowledge necessary to save you as much money as possible on your cryptocurrency tax returns. That puts us on the cutting edge of a brand new financial trend. When it comes to protecting your investments in the form of cryptocurrencies, Camuso CPA is one of the few CPA firms that can work with you to ensure you are compliant with tax law.

Avoid Audits/Court

Even something as simple as human error on a tax return can result in an audit by the IRS. For investors out there, this poses a significant problem when trying to report income. By hiring out to a professional CPA firm, that firm can assume responsibility for the veracity of your tax returns. Considering how busy many investors are, the savings on time alone can be enough to justify cryptocurrency CPA services. An audit alone is stressful enough, but having to go to federal court to prove you earned your wealth legally is a real drain on both time and resources.

 

Hopefully we’ve explained the necessity for CPA tax help when it comes to cryptocurrency tax returns succinctly enough. Here at Camuso CPA, we are proud to help people in the Charlotte area save money on their tax returns. If you would like to know more about how our cryptocurrency tax services can benefit you, please do not hesitate to reach out to us at your earliest convenience. One of our friendly and knowledgeable representatives will be happy to answer any questions that you may have.

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Incorporating to Save Money on Cryptocurrency Taxes

With the new tax cuts, many people are scrambling to see if they can save money by incorporating, since the new corporate tax rate is much lower than on high income individuals. But how does that affect cryptocurrencies? Here at Camuso CPA, we offer cryptocurrency tax help in Charlotte. To help you better understand how incorporating can save money on cryptocurrency taxes, we thought we would go over the pros and cons of incorporating for your cryptocurrency tax returns here.

Pros

To reap the benefits of incorporating for cryptocurrency taxes, your business needs to be actively trading in cryptocurrencies. If that is the case, it can stand to benefit from incorporating in three main ways.

  • Incorporating can simplify reporting if you are an active trader. This is because when filing taxes on a personal level, every single cryptocurrency transaction must be recorded line by line. When you have hundreds or more of trades a month, this gets extremely time consuming. For corporations however, the reporting is much easier, and focuses more on the broader actual revenue generated than individual transactions.
  • There are potential fringe benefits that can be taken advantage of by incorporating. For instance, retirement accounts can be setup that allow significantly more contributions for a corporation than an individual is allowed. In fact, some of these accounts are set up to hold cryptocurrencies, so you can eliminate any unwanted transaction costs when saving with this new form of currency.
  • Finally, there is a potential to make a deduction on your tax return for Qualified Business income as the new changes for 2018 start to take effect. However, it is not clear yet whether this will apply to cryptocurrencies. Whether or not this will provide tax relief remains to be seen, but if the Qualified Business income applies to them, there is the possibility of significant savings.

Cons

With taxes, every decision has repercussions. There will always be downsides to consider when structuring a corporation for tax purposes. Here are some of those considerations to weigh when considering the benefits of incorporating to save money on cryptocurrency taxes.

  • When you incorporate, there will be two sets of tax returns to file instead of just one. There is one for the individual, and one for the corporation. However, if you are hiring out to a professional CPA firm to incorporate anyway, they will also be able to help you with your tax returns as well.
  • Filing as a corporation means that to trade, you must do so with an institutional account. These accounts limit the number of exchanges that you can perform and qualify for.
  • If your cryptocurrency mining strategy includes long term strategies, you may be losing money by incorporating. This is because long term capital gains rates are not as high as they are for taxes on corporate income.
  • If you incorporate, there will be a year end close out. This means you must treat all your cryptocurrency inventory as if it was already sold. For individuals, this is only the case when they sell or swap out their cryptocurrencies.
  • There is also the risk of double taxation when you set up as a C corporation. That is because a C corporation pays their own corporate taxes, and then issue dividends which are themselves taxed. This overall rate needs to be compared to the individual rate to ensure money is not being lost.

Hopefully you feel a little bit more knowledgeable about incorporating to save money on cryptocurrency taxes. If you are looking for cryptocurrency tax help in Charlotte, then Camuso CPA is the firm to call. For more info, please don’t hesitate to reach out. We’ll be happy to provide any information that you may need.

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