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What Investors Don’t Know About Tracking Cryptocurrency For Taxes and How It Will Hurt Them

Here at Camuso CPA, we offer a wide array of tax and accounting services for cryptocurrency investors and traders including tax preparation, tax planning and portfolio reconciliations. Camuso CPA strives to deliver useful insights and offer relevant explanations about the latest tax and financial topics.

How It Works

How you report the cryptocurrency transactions will depend on how long ago you bought your cryptocurrency and on the price at which you purchased it. If you’ve held the crypto for less than a year before transacting with it, it’s taxed as a short-term capital gain, which is still taxed at the same rate as ordinary income. But if you’ve held crypto for longer than a year before using it, it is taxed as a long-term capital gain at lower rates.

As discussed before, the IRS requires that taxpayers report the fair market value of their coins – in a reasonable and consistent manner – on the date of purchase. The fair market value reported by a taxpayer disposing of cryptocurrencies should serve as the additional cost basis for the new taxpayer acquiring the currency. This is easier said than done because taxpayers tend to report conflicting cost basis that maximize personal tax advantages. As you can see tracking cost basis is a cumulative process.

How This Impacts Taxpayers

Properly tracking and reporting your cost basis is imperative to protect your assets from penalties and interest as a result of underreporting. When analyzing cryptocurrency portfolios our starting point is the last ending tax year’s cost basis for each asset which is considered along with all relevant transactions from the current year to arrive at both an ending tax liability and ending cost basis for each respective asset you are holding.

This means that if you did not track your cost basis correctly in prior years or did not report it that your portfolio calculation for years following that will also be incorrect.

It is clear that, with the huge price declines in cryptocurrency markets during 2018, many people will be considering harvesting losses and reporting this for a tax benefit.

If you did not report crypto activity up to now or tracked your cost basis improperly, those choosing to reveal losses this year will be at a high risk of audit and tax penalties. Taxpayers that have not previously reported will also need to report their crypto transactions every year going forward.

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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Form 1099-K: What Cryptocurrency Investors Need to Know in 2019

Here at Camuso CPA, we offer a wide array of tax and accounting services for cryptocurrency investors and traders including tax preparation, tax planning and portfolio reconciliations. Camuso CPA strives to deliver useful insights and offer relevant explanations about the latest tax and financial topics.

The IRS has demonstrated it intends to enforce existing 1099 reporting rules on cryptocurrency exchanges, but it has not followed up by providing clarity regarding those rules. For instance, trading platforms might have to send 1099-B forms to users who exchange one type of coin for another, but they’re not explicitly required to send the forms the way brokers are for stock trades. Generally, requirements surrounding the 1099-B remain unclear for cryptocurrencies.

The IRS has already forced a Coinbase to report users on form 1099-K, the same form home-share and ride-share companies use to report transactions with homeowners and drivers. The federal reporting threshold for the 1099-K is currently set at $20,000 and 200 transactions per year.

The 1099-K lacks the cost basis details required to capture the capital gain/loss calculation that would ultimately determine taxable income and tax revenue for the IRS.

If people are transacting in digital currency, it’s important that anyone understands that there’s a tax obligation on their part. Whether they’re paying their taxes or whether they’re day traders– it doesn’t matter. Any time there is a transaction with digital currency, it’s important that people understand there is a tax liability.

The reason that 1099-K are not usually accurate is because they do not report the relevant cost basis data necessary to accurately calculate capital gains/losses. Additionally, this form does not reconcile trades across multiple exchanges. Our team at Camuso CPA works with cryptocurrency investors and traders on a daily basis to accurately calculate all of your cryptocurrency transactions in order to properly report them for tax purposes.

Properly tracking and reporting your cost basis is imperative to protect your assets from penalties and interest as a result of underreporting. When analyzing cryptocurrency portfolios our starting point is the last ending tax year’s cost basis for each asset which is considered along with all relevant transactions from the current year to arrive at both an ending tax liability and ending cost basis for each respective asset you are holding. This means that if you did not track your cost basis correctly in prior years or did not report it that your portfolio calculation for years following that will also be incorrect. This can cause cascading and costly issues across multiple years of tax returns in many cases.

Analyzing financial transactions are a detailed process that can easily be plagued with costly errors if you do not have a structured process and workflow in place. Analyzing crypto transactions adds another layer of complexity due to the nascency of this industry and the reporting standards from exchanges. Without the proper experience and training it is very easy for well-meaning accountants to make costly errors related to the portfolio calculations and advisory they provide investors.

Be careful and do you due diligence. At the end of the day your tax return is your responsibility and it is your job to work with an experienced CPA firm to protect your assets. I would suggest that investors work with a CPA that not only understands and invests in crypto but also a CPA that has a strong background in financial services.

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. We are industry leaders in cryptocurrency tax services and you will not find a better team of CPAs to assist  you with your tax needs.

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How To Treat Earnest Money Deposits for Tax Purposes

Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning. If you are interested in how this might specifically benefit your business or portfolio, please don’t hesitate to reach out in detail today to schedule a free initial consultation regarding your specific facts and circumstances.

Many investors think earnest money deposits are an expense when in fact they are treated as an asset. Although an earnest money deposit is no longer in your possession once paid, it will give you a direct value in the near future whether you purchase a property or whether you receive a refund of your earnest money deposit.  When you pay the earnest money deposit, you are creating a current asset, and when you purchase the property, the earnest money deposit reduces your cash payment that is a reduction of a current asset.

While it is very important to track earnest money deposits for any real estate investor, it becomes increasingly important for flippers and investors who are purchasing real estate on a large scale.  When you expand your business or portfolio and there are multiple purchases taking place in a short amount of time, earnest money deposits can be overlooked.

Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, 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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Can I invest in a syndication using a 1031 Exchange?

Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning. If you are interested in how this might specifically benefit your business or portfolio, please don’t hesitate to reach out in detail today to schedule a free initial consultation regarding your specific facts and circumstances.

Do you have a rental property that you’re looking to sell using 1031 exchange?

There is a common misconception that you can simply do a 1031 exchange directly into a syndication. However, this is not possible because when you invest in a syndication, you are purchasing part of an entity that owns real estate not the real estate itself.

A viable option as an alternative which can use a 1031 exchange is a tenant in common structure or Delaware Statutory Trust . While these options are similar to syndications, they are not syndications.

Delaware Statutory Trust are derived from Delaware Statutory law as a separate legal entity and formed as private governing agreements for the purposes of managing, administering, investing and or operating real, tangible and intangible property; or business or professional activities for profit that are carried on by one or more individuals who act as trustees for the benefit of a party who is entitled to a beneficial interest in the trust property. Delaware Statutory Trusts are not new, in 2004, the IRS came out with an official Revenue Ruling detailing how a DST could be structured in such a way that it would qualify as a property replacement vehicle for 1031 Exchanges.

Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, 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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Why Cryptocurrency Investors Cannot Use Popular Tax Preparation Software

Here at Camuso CPA, we offer a wide array of tax and accounting services for cryptocurrency investors and traders including tax preparation, tax planning and portfolio reconciliations.

Virtual currency exchanges signed up millions of new users in 2018. However, cryptocurrency became an increasingly mainstream investment last year, and more and more people started trading at high volumes. By the end of the year, some of the more active cryptocurrency investors had made thousands of trades.

The IRS requires investors to submit records showing every time they sold or spent their virtual currency assets. For high volume traders, this can add up quickly.

As the cryptocurrency investment community gets ready for tax season, some high-volume investors are finding they are no longer able to self-prepare. This is because many of the existing tax preparation software limits the number of transactions you can report. TurboTax Online can only accept up to 500 transactions per account, and the company warns that online performance is likely to go down as more information is uploaded.

Camuso CPA offers the highest-quality tax advice and planning services specifically focused on the needs of cryptocurrency investors.  The tax laws are changing, and the IRS is focusing on the crypto investors. Cryptocurrency investors need sound tax advice from a trusted and experienced CPA.

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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Why Do People Love The Tax Benefits of Rental Portfolios

Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning. If you are interested in how this might specifically benefit your business or portfolio, please don’t hesitate to reach out in detail today to schedule a free initial consultation regarding your specific facts and circumstances.

For most, tax season is a time of year they do not enjoy. We understand that most people do not like taxes and most definitely do not like paying them. Real estate investors enjoy great advantages in building wealth and passive income while keeping tax liabilities down. There are even greater benefits for those who expand real estate investments or get started with real estate investing in 2018.

Depreciation

This is a non-cash deduction that spreads the cost of an asset over multiple years. This paper expense can protect other income from taxes and reduce your tax bill.  The Tax Cuts and Jobs Act has opened a new window of opportunity for investors and property buyers to enjoy a 100% first-year bonus depreciation deduction. This break is retroactive for 2017 tax filings on property acquired and in service by September 2017. This break will be available until 2022, when it begins to be reduced by 20% per year until phased out.

Leverage

Many investors use debt leverage to buy real estate. Leverage magnifies the profits mentioned above. The interest on debt is deductible as a business expense.

To raise cash most investors consider selling investments. This leads to taxes or complicated procedures to minimize taxes. Another option is t pull capital out of an investment tax-free by refinancing.

Reduced Pass-Through Taxes

Pass-through income from business entities such as LLCs now gets a 20% deduction on qualified income. This allows successful existing real estate firms to expand and enjoy better profitability while making it more appealing and advantageous to launch new real estate startups or get started in real estate investing through legal entities like limited liability companies.

1031 Tax-Deferred Exchange

A 1031 Exchange is a transaction in which a taxpayer is allowed to exchange one investment property for another by deferring the tax consequence of a sale. The transaction is authorized by 1031 of the IRS Code. Executing and completing a 1031 exchange requires meeting specific criteria.

Installment Sales

When a taxpayer sells a capital asset on an installment note with the buyer making payments over time can choose to spread the income from the sale over the life of the installment note. Spreading the capital gains income over multiple years can reduce the amount of tax compared to reporting the entire gain in one year.

The key benefit of the installment sale strategy is spreading capital gains income over time.

Retirement Account Investments And Contributions

IRAs and 401k retirement plans are incredible tools to build wealth while minimizing taxes. Taxpayers can self-direct these to invest in real estate rather than tradition investment vehicles. While self-directed IRAs are a great tax planning tool, there are many pitfalls and strict rules to be aware of.

Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, 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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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.

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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Israel’s Tax Body Pursuing Cryptocurrency Investors

Here at Camuso CPA, we offer a wide array of tax services for 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.

Much like the USA, Israel taxes cryptocurrency as property which exposes it to capital gains liabilities. The tax-collection agency of Israel is actively targeting cryptocurrency traders and investors in in order to reduce tax evasion.

Some of the measures taken include sending notice letters to individuals suspected of not reporting their earnings from cryptocurrency trading. It was cited that some of the tell-tale signs of tax evasion by cryptocurrency traders include frequent travels abroad without documentation or material evidence of how the trip’s expenses will be met. Additionally, those who own multiple real estate properties are also being targeted.

The Australian Tax Office has also recently warned Australians to declare their annual returns from virtual currencies. The main intention is to tighten regulations and improve the tax collection from virtual currency-related activities. This is something similar to what other regulatory agencies are doing around the world.

Earlier this year, America, the U.K., Canada, Australia, and the Netherlands formed 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).

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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What To Do If You Have Not Reported Your Crypto Trades On Last Year’s Tax Return

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.

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.

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.

The IRS can go back up to three years to prosecute cases of tax evasion, and in cases where they find substantial error, they can decide to go back up to six years or more. If you did not report your cryptocurrency transactions properly in prior years the best course of action is to file an amended tax return.

Step 1: Calculate Your Tax Liability

When preparing your tax return, you are going to have to figure out your taxable income from cryptocurrencies for the year. This involves figuring out how much of your crypto assets were converted into non-crypto assets like cash or goods and services as well as other cryptocurrencies. Your cryptocurrency holdings aren’t taxable. Anytime you sold cryptocurrency or used it to buy something, have capital gains exposure.

You’ve already got records of most of those transactions, either on the blockchain or from your wallet provider, but converting it to dollars can be a real hassle since you’ll need to run the value of the cryptocurrency against the price of the crypto at the time of the transaction. First thing’s first, you’ll want to download all transaction data from the exchanges you use, which are usually available as CSV files. Some exchanges like Coinbase send users form 1099-K if they have received at least 20,000 US dollars cash sales of crypto related to at least 200 transactions in a calendar year. However, if you don’t use an exchange, do your best to document every transaction.

If doing cryptocurrency tax is proving to be a challenging feat, you should consider enlisting the services of a qualified CPA at a  professional tax firm such as Camuso CPA.

Step 2: Amend your return

Once you have determined your capital gains liability, you should download a current IRS Form 1040X, Amended U.S. Individual Income Tax Return. This form comes with easy-to-follow instructions and requires you to only include new or updated information.

Step 3: Mail in your amended return

After preparing your amended tax return to reflect your cryptocurrency transactions they will be mailed to the IRS along with all applicable tax payments.

While paying taxes can at times be painful, it is very important that you include your crypto-trading activity with your tax return. A lot of traders are convinced that because of the anonymous, decentralized nature of Blockchain and crypto transactions, that there is no way for the government to see or know that they are making money trading/buying/selling cryptocurrency. Unfortunately for these people, this is just not true. The Blockchain is a distributed public ledger, meaning anyone can view the ledger at anytime. Figuring out an individual’s activities on that ledger essentially comes down to associating a wallet address with a name. You can bet that the IRS is only gearing up to become proficient at doing that.

Ultimately, if you choose not to file your gains/losses, you will be committing blatant tax fraud to which the IRS can enforce a number of penalties, including criminal prosecution, five years in prison, along with a fine of up to $250,000.

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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How Does A Bear Market and Losing Trading Positions Benefit Cryptocurrency Investors

Here at Camuso CPA, we offer a wide array of tax and accounting services for cryptocurrency investors and traders including tax preparation, tax planning and portfolio reconciliations.

Since cryptocurrencies are generally classified as property, wash sale regulations should not currently be a concern for investors. Today, wash sales only apply to stocks and securities, so traders are operating in a gray area for now until further IRS clarification is issued. This means investors can sell an investment to realize a tax loss, only to buy it back immediately thereafter at a bargain.

This can offer very large tax benefits to investors by allowing them to pay significantly less taxes on capital gains which can be offset by their wash sale trades.

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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