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United Kingdom Issues Cryptocurrency Tax Guidance

Here at Camuso CPA, we offer a wide array of tax services for cryptocurrency investors including tax preparation and tax planning. Financial service companies are transitioning from employee driven revenue models to information driven revenue models. Camuso CPA strives to deliver useful insights and offer relevant explanations about the latest tax and financial topics.

The United Kingdom’s tax agency has released an explanation of how it sees cryptocurrency assets and how individuals will be taxed on their holdings. The report focuses on how individuals possessing cryptocurrency might be taxed,but does not outline the tax structure for tokens held by businesses or for business purposes. Guidance on that will be published at a later date. Her Majesty’s Revenue and Customs (HMRC) is the government agency responsible for collecting taxes.

This does not impact US investors, but we watch all crypto tax regulation developments closely to gain insights to perspectives and circumstances that can impact future legislation here in the USA. Much like the US the UK tends to view crypto tax property for tax purposes.

The report notes a token’s treatment for tax purposes is dependent on the token’s use case, rather than its definition. Cryptocurrencies will not be taxed in the same way as gambling. The report goes into detail, explaining how and when their transactions may be classified as securities. To simplify the calculations required, taxpayers are permitted to pool different assets together.

Investors who purchase tokens specifically in the hopes that their value will increase will be required to pay capital gains tax when they sell, while individuals who receive tokens from their employers as a form of payment, from mining, transaction fees or airdrops will have to pay income tax and national insurance contributions.

Tax authorities across the world will continue to issue further guidance and focus more heavily on cryptocurrency tax compliance. We will continue to track these developments closely. Time will tell, but it will be interesting to see how things develop here in the states related to the designation of cryptocurrency as intangible property from the Private Letter Ruling in 2014.

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If you 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.

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End to Anonymous Cryptocurrency Trading by Shapeshift, A CPA’s Perspective

Cryptocurrency exchange Shapeshift is launching a new mandatory membership program that will now require users to provide personal information. Cryptocurrency exchanges are under more regulatory pressure than ever, with governments requiring that they conduct KYC and AML procedures to prevent fraud. As a centralized exchange, Shapeshift lacks the ability to operate without a license or some form of cooperation from local governments.

KYC and AML processes are the first step for both exchanges and users to begin moving towards compliance and disclosure to regulatory authorities. As exchanges such as Shapeshift move towards user registration compliance, we noted in a separate recent article that various countries across the globe have developed in international crypto tax force to target non-compliant cryptocurrency investors.

As the topic of institutional investors and Bitcoin ETFs continue to gain more relevance, we will undoubtedly start to see more centralized exchanges conform to the same demands that traditional financial institutions comply with in order to gain access to larger customers. Our prediction is that we will see further sweeping inquiries into user data from exchanges such as we saw last year with the John Doe request from Coinbase, additionally investors should expect to receive more 1099-K forms from exchanges in future years.

The change from being an ‘exchange without accounts’ to requiring personal information was made for 3 primary reasons:

1) The requests of many of our users to have account-related features: A record of transaction history, saved/whitelisted addresses, and email notifications, etc.

2) Increasing interest in the broad phenomenon of tokenization — the ability to “financialize” and bring liquidity to various aspects of business/customer relationships. Specifically, the ability to build tokenized loyalty programs, in which the engagement between a business and its customers can itself become an asset.

3) The practice of requiring customers to hand over personal private information is one we’ve struggled with since inception. To the extent that digital asset technology remains a legal grey area, we need to be prudent and thoughtful in our approach as we navigate the regulatory environment.

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If you 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.

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SEC STATES BITCOIN AND ETHEREUM ARE NOT SECURITIES, FAVORABLE TAX IMPLICATIONS

William Hinman, the Securities and Exchange Commission’ director of the division of corporate finance said Thursday that ether — the currency that powers the Ethereum network — shouldn’t be regulated in the same way as stocks and bonds.

“Based on my understanding of the present state of ether, the Ethereum network, and its decentralized structure, current offers and sales of ether are not securities transactions,” Hinman said at Yahoo’s All Market Summit: Crypto in San Francisco. “And, as with bitcoin, applying the disclosure regime of the federal securities laws to current transactions in ether would seem to add little value.”

His statements follow similar ones made in April by SEC chair Jay Clayton about bitcoin. Taken together, the two sets of remarks provide the clearest understanding of how the regulatory agency views the cryptocurrency market.

When a cryptocurrency becomes sufficiently decentralized, as the widely popular bitcoin and ether have, the agency no longer views it as a security. In contrast, smaller initial coin offerings, or ICOs, are almost always securities in the SEC’s eyes. That distinction matters, because securities are subject to the same regulations as normal stocks.

This indication by the SEC has implications investors may not first consider from a tax perspective. Since cryptocurrencies are generally classified as property, wash sale regulations should not currently be a concern for investors. This means investors can sell an investment to realize a tax loss, only to buy it back immediately thereafter at a bargain.

Today, wash sales only apply to stocks and securities, since Bitcoin and Ethereum have not been labeled a stock or security, the IRS can only tax traders for non-economic substance transactions under property rules. These transactions are similar to wash sales, considering the volatility of crypto markets and the potential argument that investors made late trades in response to market-moving news as opposed to tax motivations, traders have a legitimate position on the matter.

https://www.camusocpa.com/contact/#/

Are you looking for a CPA in for cryptocurrency tax help? Give Camuso CPA a call today. We also offer a host of other tax services for your benefit. For more information on how our services can help you, please do not hesitate to give us a call 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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WHAT TO DO IF YOU STILL HAVE NOT REPORTED CRYPTOCURRENCY TAXES THIS YEAR

With an exponential gain in value and thousands of businesses now accepting it as a form of payment, Bitcoin has quickly become one of the trending topics throughout the country. While there are various types of cryptocurrency out there, Bitcoin is currently the most popular form of digital currency (also known as virtual or cryptocurrency) throughout the world and is able to be exchanged for U.S dollars, Euros, and other real currency. In addition, Bitcoin can be traded for other virtual currencies, such as Ripple or Ethereum currency.

Whether people use cryptocurrencies to pay for products and services or strictly for investment purposes, they may not be aware that they have a possible taxable impact. If you have not reported your cryptocurrency taxes this year, you are not alone. In this article, we are going to review cryptocurrency and taxes, as well as what to do it you still have not reported them.

Before diving into the details of digital currency and taxes, we wanted to ensure our readers that while this article provides helpful and detailed information, it does not constitute professional financial counsel and should not be used as a replacement for tax advice from professional CPA firms. As such, we recommend reaching out to local CPA firms for individualized service that is tailored to your unique tax situation.

Do You Have To Pay Cryptocurrency Taxes?

In the past, many cryptocurrency investors pocketed profits and avoided taxation by selling virtual currency and putting the money made back into other digital tokens. This method, and loophole so to speak, is known as a like-kind exchange. However, with the value of cryptocurrency taking off this past year, along with the profits of investors, the IRS is holding it down come tax season. In addition to closing this loophole that many crypto holders used, the IRS has stated that cryptocurrency is considered property and that selling digital currency should be reported as a capital gain or loss. But what does this mean? Well, this means that selling certain virtual currencies in exchange for another virtual coin, or even using cryptocurrency to buy goods and services, is considered taxable and therefore should be reported come tax season. It is mandated by law that you pay taxes on those earnings.

What Happens If You Do Not Report Cryptocurrency Capital Gains?

Some cryptocurrency investors, despite the IRS’s warnings, still choose to hide their profits by not reporting their capital gains from virtual currencies. This is no surprise, especially after a past survey revealed that over 35 percent of cryptocurrency owners claimed they do not plan on reporting any gains or losses on their tax return. What many investors in this percentage may not be aware of is that not reporting their capital gains and losses is a form of blatant tax fraud. Purposefully hiding profits and failing to report capital gains can enable the IRS to enforce numerous penalties, such as criminal prosecution, which is generally used in more extreme cases that involve larger profits and capital gains. Those that commit this tax fraud can potentially face up to five years in prison. What’s more, there is generally a fine up to $250,000. Similarly, crypto investors that purposely file a false tax return to hide capital gains may have to pay a $250,000 fine, as well as face up to three years in prison.

Of course, keeping track of all of the transactions made with virtual currency is not always easy. There are not any promises that distributed digital currency exchanges are going to send a Form 1099 that details your trades as well as your profits and losses. Not to mention, if virtual coins were used to pay for goods and services, that is a taxable transaction that you will have to handle entirely on your own. While crypto transactions can be complex, the IRS and government fully expect us to comply with the set tax guidelines for cryptocurrency. Failing to do so can lead to further complications and issues down the like.

What If You Didn’t Report Capital Gains From Cryptocurrency?

Failing to report your capital gains is something that happens more often than people think, whether it is accidental or purposely. However, reporting these gains is the law and should be done to avoid any trouble. If you failed to report any income or capital gains on your taxes, or if you are uncertain whether or not you compiled within the guidelines set by the IRS, there are certain steps you can take to reduce the risk of being fined, or worse, facing criminal penalties. The right thing to do in this situation is to file your tax return immediately and pay as much tax owed as possible to avoid any additional penalties. While it is dependant on which reporting requirements you are subject to, in addition to the nature of the noncompliance, if you did not report your capital gains it may be best to:

  • Create a corrected Form W-2 using Form W-2c if you paid people with cryptocurrency
  • File a corrected Form 1099-MISC if you paid independent contractors with digital currency.
  • File an FBAR, or a Report of Foreign Bank and Financial Accounts to disclose foreign digital currency wallets.
  • Enroll in the Offshore Voluntary Disclosure Program to help reduce any potential fines and penalties and avoid jail time.
  • Get help from a local tax consultant.

While taking these steps can potentially help reduce any fines and penalties, or even protect you from criminal prosecution, if you still have not reported your cryptocurrency income and capital gains, it is vital that you discuss your situation with an experienced tax CPA that specializes in Bitcoin and other digital currencies. If you have questions about reporting virtual currencies on your taxes, a certified CPA should be able to assist you.

What Happens If You Owe and Do Not File or Pay Your Taxes?

When your taxes are late or not paid, the IRS will assess a failure-to-pay penalty. This penalty goes into effect after the regular due date. Typically these penalties are a certain interest charge of the balance due for each month or part of a month you are late.

Once the IRS discovers that your taxes are late, they will begin to send you computer paragraph (CP) notices. These notices will show how much you owe and demand immediate payment. If no actions are taken, the notices will continue to pop up in your mailbox for two to six months. If you avoid the notices and still do not pay the owed taxes, the following can occur.

Tax Levy

When the IRS seizes your assets, it is known as a tax levy. A tax levy only happens when all forms of communication and arrangements are ignored. The final notice will be sent at least 30 days before further action is taken.

Wage Garnishment

A wage garnishment, also known as a wage levy, is when the IRS contacts your employment provider and demand a portion of your paycheck. This will occur during every pay period until the taxes are paid in full or a payment agreement with the IRS is reached.

Bank Levy

A bank levy is when the IRS contacts your bank. When this happens, your bank will instantly freeze your accounts so you are unable to take money out. If arrangements are not made, the bank will send money to the IRS about three weeks later. This of course is something that shouldn’t be taken lightly.

Asset Seizure

The IRS has the ability to seize various assets like vehicles, houses, boats, and other assets if the owed taxes are not paid and an agreement has not been reached. This is something you will want to avoid, as getting seized property back can often be a long and difficult process.

Passport Revocation or Suspension

Many people don’t know this, but the IRS can revoke or suspend the passports of delinquent taxpayers who owe more than $50,000 in taxes (including interest and other non-payment penalties). Not to mention, the State Department will likely not issue or renew your passport if you owe more than 50K.

Criminal Prosecution

If you continue to file a tax return year after year, or you avoid paying the taxes that you owe you could be faced with criminal charges. Criminal prosecution is typically tied to tax evasion or tax fraud and since the government prefers working with non-compliant taxpayers. Since proof of intent to defraud is hard to prove, the IRS looks will generally search for patterns of abuse before taking any case to a criminal investigation

Again, if you fail to pay your taxes, most of these penalties and negative consequences can be prevented by working with a tax professional or the IRS directly.

https://www.camusocpa.com/contact/#/

If you searching for local CPA firms in Charlotte 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.

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PORTUGAL PROVIDES HIGHLY ANTICIPATED TAX CLARITY FOR THE EU

The Portuguese Tax Authority (PTA) is one of few countries that has taken specific steps to create a framework defined framework for cryptocurrency taxation, helping to provide a great amount of clarity on the murky subject.

This came a result of an unidentified company seeking guidance on whether or not its token was covered by value added tax (VAT) exemptions similar to what are offered for legal tender. The announcement, like most tax provisions, contain general provisions and exemptions as noted below:

Transactions that contain a token could, in principle, be considered as a critical transfer of goods and result in a VAT liability. However, the PTA acknowledged that the digital coins could be eligible for the legal tender VAT exemption.

The PTA explained that the exemption would only be applicable in instances where the transfer of the tokens occurs in an alternate form of payment. This means that, the tokens most likely would be exempt if they are exchanged using a defined legal currency.

Since the VAT system is used among all European Union (EU) member states, the decision by the PTA most likely will be mirrored throughout EU states. This is a large step forward for the global crypto-community who is looking to move the industry forward by aligning with new regulations for mainstream adoption.

Are you looking for a CPA in for cryptocurrency tax help? Give Camuso CPA a call today. We also offer a host of other tax services for your benefit. For more information on how our services can help you, please do not hesitate to give us a call 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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AICPA REQUESTS FURTHER GUIDANCE FROM IRS ON CRYPTOCURRENCY

The American Institute of Certified Public Accountants which is the world’s largest association of accounting professionals asked the IRS to issue immediate, updated guidance regarding the tax treatment of cryptocurrency transactions. The first IRS tax guidance for cryptocurrencies was introduced March 2014, few CPAs have done comprehensive analyses of the record-keeping and enforcement challenges that will arise from the IRS designation of Bitcoin as property rather than currency.

The AICPA’s submission to the IRS includes suggested Frequently Asked Questions that address the following areas:

  1. Expenses of obtaining virtual currency
  2. Acceptable valuation and documentation
  3. Computation of gains and losses
  4. Need for a de minimis election
  5. Valuation for charitable contribution purposes
  6. Virtual currency events
  7. Virtual currency held and used by a dealer
  8. Traders and dealers of virtual currency
  9. Treatment under Sec. 1031
  10. Treatment under Sec. 453
  11. Holding virtual currency in a retirement account
  12. Foreign reporting requirements for virtual currency

The lack of guidance around the taxation of cryptocurrencies pose uncertainties to the taxation of cryptocurrency and blockchain technology transactions. Additional guidance is largely overdue. Our team along with industry participants are awaiting answers and clarification from the IRS.

Are you looking for a CPA in for cryptocurrency tax help? Give Camuso CPA a call today. We also offer a host of other tax services for your benefit. For more information on how our services can help you, please do not hesitate to give us a call 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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CRYPTOCURRENCY DIVESTMENT TAX PLANNING STRATEGY: CHARITABLE REMAINDER TRUSTS

Here at Camuso CPA, we offer cryptocurrency tax planning and estate planning services in Charlotte to clients across the country. 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 when it comes to taxes . 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 charitable remainder trusts, a overlooked tax deferral methods for appreciated cryptocurrency.

Capital gains take a large portion of investors wealth, specifically when selling low cost basis short term assets. Charitable remainder trusts offer a way to sell immediately while still deferring this capital gains income over a much longer period, such as 20 years or even a lifetime. This method also provides benefit to charity, with a corresponding charitable deduction.

Charitable remainder trusts can be an effective tool for converting cryptocurrency into higher income producing assets. Charitable remainder trusts may accept cryptocurrency as an asset, and then pay the net income generated by the property to the trust beneficiaries or sell the property and then pay a fixed percentage of the value of the assets.

A charitable remainder trust is an irrevocable trust that provides for and maintains two sets of beneficiaries. First is the income beneficiary. The income beneficiary receives a set percentage of income from the trust for life or a term of up to 20 years. The second is the charitable beneficiary. This could be one or more charitable organizations that receive the principal of the trust after the income beneficiaries pass away.

A charitable remainder trust can sell a property, reinvest the proceeds into a diversified portfolio of securities, and pay a percent of the trust value, all without any capital gains tax liability for the donor. This is a very useful tool to strategically minimize cryptocurrency taxes.

TAX BENEFITS

  1. The sale or exchange of cryptocurrency is completely tax-free
  2. You only pay tax each year on the annual payment you receive from the trust. This payment would be taxed at favorable capital gains rates. Depending on the amount of your other annual income, this strategy will likely keep you in the lower capital gains brackets.
  3. In the year of trust creation, you receive an income tax deduction equal to the actuarial value of the charity’s projected gift.This actuarial value is a calculation done by your CPA. The smaller the payment you select, the larger the charitable deduction. Assuming you choose an appropriate charity, the deduction can be used to reduce up to 30 percent of your income in a given year, and any unusable amount carries forward for up to five future years.

There are many technical considerations when tax planning for charitable remainder trust and cryptocurrencies. Most important, the IRS requires that the actuarial value of the charity’s share must be at least 10 percent of the assets contributed to the trust. Be sure to consult with appropriate counsel to ensure you meet the 10 percent rule and other technical requirements.

If you are holding substantial cryptocurrency assets at a low cost basis and are looking for effective long term tax planning and estate planning strategies, Camuso CPA can help! Please feel free to give us a call for more information about cryptocurrency and other tax planning 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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Important Wash Sales Update for Cryptocurrency Investors and Traders

Here at Camuso CPA, we offer a wide array of tax services for investors including tax preparation and tax planning. Financial service and technology companies are transitioning from employee driven revenue models to information driven revenue models. Camuso CPA strives to deliver useful insights and offer relevant explanations about the latest tax and financial topics.

This indication by the SEC has implications investors may not first consider from a tax perspective. Since cryptocurrencies are generally classified as property, wash sale regulations should not currently be a concern for investors. This means investors can sell an investment to realize a tax loss, only to buy it back immediately thereafter at a bargain.

Today, wash sales only apply to stocks and securities, since Bitcoin and Ethereum have not been labeled a stock or security, the IRS can only tax traders for non-economic substance transactions under property rules. These transactions are similar to wash sales, considering the volatility of crypto markets and the potential argument that investors made late trades in response to market-moving news as opposed to tax motivations, traders have a legitimate position on the matter.

Contact Us Today

If you 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.

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Experienced CryptoCPA: Definitive Guide to 2018 Masternode Taxation & Tax Planning

Here at Camuso CPA, we offer a wide array of tax services for investors including tax preparation and tax planning. Financial service and technology companies are transitioning from employee driven revenue models to information driven revenue models. Camuso CPA strives to deliver useful insights and offer relevant explanations about the latest tax and financial topics.

In our Experienced CryptoCPA Tax Topics & Guides segment, we are taking a more in depth approach in covering all things cryptocurrency, tax, real estate and finance.

Just about every virtual currency transaction; from mining and spending to trading and exchanging, will be a taxable event for U.S. tax purposes. According to Uncle Sam, Bitcoin and other cryptos are classified as property. In our latest episode, we will go over how cryptocurrency masternode activity is taxed and how business owners and investors should prepare for this tax season.

Contact Us Today

If you 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.

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Spending Cryptocurrency Can Be A Huge Tax Trap, Learn How

With an exponential gain in value and thousands of businesses now accepting it as a form of payment, Bitcoin has quickly become one of the trending topics throughout the country. While there are various types of cryptocurrency out there, Bitcoin is currently the most popular form of digital currency (also known as virtual or cryptocurrency) throughout the world and is able to be exchanged for U.S dollars, Euros, and other real currency. In addition, Bitcoin can be traded for other virtual currencies, such as Ripple or Ethereum currency.

Whether people use cryptocurrencies to pay for products and services or strictly for investment purposes, they may not be aware that they have a possible taxable impact.

If a taxpayer purchases s virtual currency and uses it to purchase something (trades the cryptocurrecy for a good or service), 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.

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. This is not yet in effect and as a result, taxpayers are on the hook for tax liability with all cryptocurrency transactions.

https://www.camusocpa.com/contact/

If you 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.

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