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Archives for July 2018

Tax Planning For Cryptocurrency Miners

Miners are a critical part of the cryptocurrency ecosystem. New coins and bitcoin forks are being developed every day with the goal of making mining easier for both existing mining pools and new market participants. But now that an increasing number of individuals and businesses are receiving mining income, tax compliance and tax planning become an imperative consideration for any reputable operation.

Tax implications of mining cryptocurrencies

Cryptocurrency miners have two separate tax exposures. The first is the tax at the fair market value of the virtual currency on the day that it is mined into gross income. Generally, the net earnings from this activity will be exposed to self-employment tax.

The second is the capital gains which are due on the sale of bitcoins viewed as a capital asset. The basis price for the coins will be the fair market value on the date of acquisition. Capital gains will be due on the difference between that basis price and the eventual sale price.

When a miner sells their cryptocurrencies that they have mined, they will have to pay capital gains tax on any profit that they have made while owning them. The exception here is if bitcoins aren’t viewed as capital assets,but are instead viewed as inventory. This would be the case if a miner’s core business is selling cryptocurrencies. In that case, any gains on the bitcoins would be taxed as an ordinary gain or loss.

IRS Notice 2014-21 clarifies the treatment for bitcoin miners. Specifically, miners must recognize income for each bitcoin mined during the taxable year. The amount of income is equal to the market price of bitcoin on the day it is awarded on the blockchain. This also becomes the miner’s basis in the bitcoin going forward and will be used to calculate gain/loss in the future when the bitcoin is sold.

Protecting Your Assets and Minimizing Tax Exposure

The first major step in choosing your tax treatment is selecting a business entity for your operations. You have four main choices:

Sole proprietorship

Partnership

C corporation

S corporation

To determine whether the S corporation is the right entity structure for your business, you have to know how it compares to your other options. The two main benefits of operating your business as an S-Corporation is relief from double taxation, and savings on employment taxes. Tax planning and industry financial expertise is critical in this area.

If you plan to raise capital or own real estate as part of your mining operation this should also be considered during your entity structuring planning and may require establishing multiple entities.

Most miners use expensive hardware and substantial amounts of electricity to verify transactions on a decentralized blockchain network. Mining expenses, such as electricity, would not be included into basis. Instead, they would be deductible in the taxable year as an expense. Maintaining proper documentation is essential. Depreciation of the equipment used in mining will be the other largest tax deduction for miners.

If you searching for CPA firms i to assist you with reporting cryptocurrency mining income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from virtual currencies on your taxes, cryptocurrency portfolio analysis, or any other service provided by a certified accountant, Camuso CPA can help.

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CFA 2019 Exam Includes Crypto And Blockchain Topics

According to Bloomberg, the Chartered Financial Analyst (CFA) examination has added cryptocurrency and blockchain to its curriculum. Candidates for this exam are generally expected to clock 300 hours of study time.

The exam, run by the CFA institute, has reportedly prepared over 150,000 financial sector professionals through its intensive 3-tiered program, which is now set to include crypto and blockchain as part of its Level I and II curricula.

Crypto and blockchain have now been added as part of a new section called ‘Fintech in Investment Management,’ for which the materials will be released this August in preparation for CFA’s 2019 exams.

The fact that the new CFA exams in 2019 will include cryptocurrencies and blockchain, is a sign that the digital assets have arrived in Wallstreet. While digital coins have decreased in value in 2018 and the real-world impact of blockchain ventures could ultimately transform the global financial system.

If you are searching for CPA firms to assist you with reporting cryptocurrency income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from virtual currencies on your taxes, cryptocurrency portfolio analysis, or any other service provided by a certified accountant, Camuso CPA can help.

Patrick Camuso, CPA is founder and owner of Camuso CPA, a Charlotte, NC based CPA firm consulting to cryptocurrency investors, miners and business nationwide.

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Tax Reform Increases Cost Segregation Benefits for Real Estate Investors

Here at Camuso CPA PLLC, cost segregation is just one of the services that we provide at our firm. For those of you who are unfamiliar with the term, cost segregation is simply the act of identifying the assets of a business, their value, and then classifying those assets in regards to the federal tax code. It can be beneficial for many businesses and investors.

While the full implications of the Tax Cuts and Jobs Act are still unraveling, a number of tax-planning opportunities have presented themselves. Here we will outline how performing cost segregation studies can lead to permanent tax savings.

Overview Of Tax Changes

The 2017 Tax Cuts and Jobs Act (TCJA) has created a number of tax-planning opportunities, some even with permanent tax savings. One of the more exciting opportunities is the permanent tax savings that may be realized by doing cost segregation on existing buildings acquired after Sept. 27, 2017, and placed in service prior to Dec. 31, 2017.

In the past, taxpayers were not allowed to take bonus depreciation on used assets, but this restriction is removed for acquisitions after Sept. 27, 2017. As a result, personal property that was acquired as part of such a building may be eligible for immediate expensing by claiming 100 percent bonus depreciation.

While the greatest opportunity may exist for facilities acquired and placed in service in late 2017, a cost segregation study can still create opportunities to accelerate deductions if a taxpayer has made built, or renovated facilities earlier in 2017 or in prior years. A cost segregation study would create a “catch up” of depreciation deductions on the 2017 tax return for those facilities placed in service in 2016 and earlier — and allow the taxpayer to benefit from the tax rate savings at higher rates.

Benefits

Bonus depreciation significantly increases the value of completing a cost segregation study. Due to the reduction of corporate tax rates in 2018, taxpayers should review their current real estate holdings to determine if a “look-back” or retroactive cost segregation study should be performed now so that they may claim missed depreciation benefits on their 2017 tax return when taxed at a higher rate.

Regardless of a taxpayer’s structure, the new tax law provides a large benefit for any owner or investor of a used property. To maximize savings, it’s critical to consider a cost segregation study to identify all qualifying assets. Savvy taxpayers will determine their ability to use the new bonus depreciation provisions and will assess when and how to implement them as a part of their overall tax strategy.

Cost segregation studies aren’t something a business can do internally, but rather need a CPA for. And not just any CPA at that. The IRS Cost Segregation Audit Techniques Guide states:

“Preparation of cost segregation studies requires knowledge of both the construction process and the tax law involving property classifications for depreciation purposes. In general, a study by a construction engineer is more reliable than one conducted by someone with no engineering or construction background. Experience in cost estimating and allocation, as well as knowledge of the applicable tax law, are other important criteria.”

Here at Camuso CPA, we do have the ability to offer cost segregation studies to our clients. If you are interested into how this service might benefit your business, please don’t hesitate to give us a call today. One of our friendly and knowledgeable representatives will be happy to answers any questions you have.

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How to Establish A Company Structure for Real Estate Portfolios

Any business decision you make, especially directly related to your finances and business structure, should be made with a defined cost, benefit and purpose. The focus should be on maximizing your time and money by focusing on how much money you are saving versus the time it took to save that money.

One of the first decisions an investor makes when structuring a real estate portfolio is which entity is best suited for their investment goals. There is no “one size fits all” investment strategy that works for all real estate investors. However, there are common types of entities that are most used to invest in real estate.

Limited Liability Company

A limited liability company, also known as an LLC, is typically the best entity for real estate and mortgage investors that follow a “buy and hold” strategy for their investments. When an investor buys and holds real estate property, it is considered a capital asset. In most states, including North and South Carolina, the ownership of real estate does not enact the transaction of business. This choice is typically the most beneficial for long-term investors.

Limited Partnership

To have a limited partnership, there must be one or more general and limited partners for the purpose of a business venture. Typically, the general partners are responsible for managing the investment while limited partners handle the capital invested into the partnership.

One of the advantages of this entity ability to invest funds and let the general partner manage the everyday tasks associated with the operation. In addition to the limited liability and duties that investors have, there are also tax benefits, such being able to pass through tax losses, providing greater diversification, and allowing flexibility in allocating gains and loses amount partners.

S Corporation

Flipping properties has become quite the trend in recent years and is a great way for investors to profit. When real estate properties are flipped, they then are considered an inventory and the investor is technically a dealer. However, a real estate dealer is vastly different from a real estate investor.

For real estate investors that flip properties, it is best to form an S Corporation, as this allows them to avoid self-employment or social security taxes on a portion of the profits received from flipping real estate.

Multiple Entities

In the situations that real estate investors plan to flip some properties and hold others for a longer term or are syndicating funds and will be managing properties, they should consider forming at least one S corporation and at least one LLC to own property long term. Mixing real estate investment strategies in the same entity should never be done as it can lead to problems.

Additional Company Documents

After your CPA has established your Articles of Organization and EIN to set up your companies, they will also draft your company’s operating agreement and resolutions.

An operating agreement is a key document used by LLCs because it outlines the business’ financial and functional decisions including rules, regulations and provisions. The purpose of the document is to govern the internal operations of the business in a way that suits the specific needs of the business owners. Once the document is signed by the members of the limited liability company, it acts as an official contract binding them to its terms.

An operating agreement is similar in function to corporate by-laws, or analogous to a partnership agreement in multi-member LLCs. In single-member LLCs, an operating agreement is a declaration of the structure that the member has chosen for the company and sometimes used to prove in court that the LLC structure is separate from that of the individual owner and thus necessary so that the owner has documentation to prove that he or she is indeed separate from the entity itself. Most states do not require operating agreements. However, an operating agreement is highly recommended for multi-member LLCs because it structures your LLC’s finances and organization and provides rules and regulations for smooth operation.

A resolution is a written document that describes some action by the owners or managers of a company. Corporations are required by state law to make resolutions, which are routinely prepared regarding the actions of the board of directors and sometimes regarding shareholder actions. Although an LLC is not required by law to make resolutions, sometimes there are practical business reasons for an LLC resolution.

Professional CPAs can assist investors with setting these companies up by advising on your optimal structure and filing the applicable documents. Contact your local CPA to learn more.

Here at Camuso CPA, we do have the ability to offer advisory on your optimal structure and preparation services for the applicable documents along with other powerful tax planning tools to our clients.

If you are interested into how this service might benefit your business, please don’t hesitate to give us a call today. One of our friendly and knowledgeable representatives will be happy to answer any questions you have.

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Countries Cooperate To Form International Crypto Tax Force

This article does not contain tax advice, investment advice or recommendations. Every investment and trading move involves risk, you should conduct your own research when making a decision

America, the U.K., Canada, Australia, and the Netherlands are cooperating to form an International Task Force called the Joint Chiefs of Global Tax Enforcement with the goal of sharing intelligence to track down tax evaders.

The task force, also referred to as “J5”, comprises the Australian Criminal Intelligence Commission (ACIC) and Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), the Fiscale Inlichtingen- en Opsporingsdienst (FIOD), HM Revenue & Customs (HMRC), and Internal Revenue Service Criminal Investigation (IRS-CI).

Their specific targets include offshore accounts and cryptocurrencies. The IRS is set to issues a press release later this year with further details on the new task force. In their initial overview found here, the IRS outlines what the task force is originally designed to do:

1. Develop shared strategies to gather information and intelligence that will strengthen operational cooperation in matters of mutual interest, and target those who seek to commit transnational tax crime, cybercrime and launder the proceeds of crime

2. Drive strategies and procedures to conduct joint investigations and disrupt the activity of those who commit transnational tax crime, cybercrime, and also those who enable and assist money laundering

3. Collaborate on effective communications that reinforce that J5 is working together to tackle transnational tax crime, cybercrime and money laundering

 

 

If you are searching for CPA firms to assist you with reporting cryptocurrency income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from virtual currencies on your taxes, cryptocurrency portfolio analysis, or any other service provided by a certified accountant, Camuso CPA can help.

Patrick Camuso, CPA is founder and owner of Camuso CPA, a Charlotte, NC based CPA firm consulting to cryptocurrency investors, miners and business nationwide.

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