How do you protect your earnings from the IRS? What happens when you don’t?
Read on to find out exactly why there is an interest in paying taxes, especially this year.
There are three letters that strike fear into the heart of every Bitcoin trader and trader, and these are not XRP. Of course I’m talking about the IRS and we all know it means business.
And while those of us in the cryptocurrency world believe that we need to fight existing power structures in order to create a decentralized monetary system, we have no choice but to play by their rules. How do you protect your winnings?
I suppose you have a choice to simply not file your taxes or report your crypto gains, but the truth is that you’re really leaving your life to chance at that point. I’ll show you how to get the IRS off your back. In this case, how you protect your winnings, is to prevent damages and fines for nice “To the Moon” deals.
I think you will notice that one of the greatest strengths of cryptography is also one of its weaknesses. I’m referring to the fact that encryption is definitely on the fringes of legitimacy.
We see more and more societal and governmental acceptance every year but we’re not there yet. Over the past few years we have seen new bills presented to Congress that could help simplify the tax process surrounding cryptocurrencies but the truth is that since you are preparing to file for 2020, this legislation will not help you.
So what are we going to do to comply with what the government will ask of us for the past year?
- Do not include your cryptocurrency or bitcoin gains or losses in your tax documents in previous years. Although it is not a good idea, the truth is that the government is now putting a lot of pressure on people who hide cryptocurrencies from their tax forms. Earlier last year, there were thousands of letters sent from the IRS to holders of bitcoin and cryptocurrency who left their crypto earnings from their tax forms. The government is now monitoring In addition, as of this year, TurboTax is asking users a specific question if they sell or trade cryptocurrency during 2020.
- The best way to get the IRS off your back is to do the bare minimum it requires and this is basically to file your taxes properly and include all of your income including crypto gains. The front line for most people with the second option is that they simply don’t know how to do it. Keeping up with your crypto trading can be very daunting. In fact for most people who regularly trade cryptocurrency, it is almost impossible. You had to keep spreadsheets for each trade and then convert it into your CPA. You can try to do it yourself but the crypto tax laws are quite complicated and it really has to do with how little the average member of the crypto community knows about the tax laws themselves. Day traders, swing traders and speculators who make moves every day without even understanding how to track their cryptocurrency for their taxes. Almost anything you do with Bitcoin or cryptocurrency is a taxable event other than crowding in or simply transferring your Bitcoin.
Unless you are an accountant yourself, the only way to deal with crypto taxes is to use a third-party service or software that is very familiar with crypto tax laws. And I’ll tell you, this is probably not your hometown of CPA. We haven’t come up with encryption yet. The good news is that there are plenty of services out there that can help you keep all your crypto tax issues from becoming problems.
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