Cryptocurrency Tax Problems
There’s a common misconception that cryptocurrency is never taxed. This is far from true. You aren’t taxed just by having it, but when it’s sold or traded, there’s a taxable event.
Many people, even crypto experts, also believe the IRS won’t know anything about any crypto trading. This is often also far from true. Part of what makes crypto secure, also lets the IRS, or anyone else, track any movement on the blockchain. It may theoretically be able to be anonymous, but once your identity is linked to your account, the IRS can see everything! That makes an audit very easy!
If you have cryptocurrency, you need to track everything going on with it and keep records for the entire time you own every coin. You also need to keep track of what’s going on with your crypto, like mining, staking, wrapping, etc. Depending on your activity, this could be a nightmare!
Luckily, there are crypto reconcilliation programs that can make this job much easier. You still need to know how to label your different transactions for the correct tax treatment. Not doing it properly could cost you money in missed losses or worse yet, get you in hot water with the IRS! If you need help getting your crypto transactions properly allocated, let us know. If you’re already under audit or have other crypto related tax issues, we can help.