It may be a little late for this year, but, it may help you to plan for next year on all this additional income you plan to make. Instead of writing out a bunch of boring info, I am listing these as FAQs, to make it easy to see what affects you. Please check with a tax professional if you think you may need to look into these.
Does the IRS really care about me buying and selling crypto? Yes, the IRS considers this one of the most underreported assets out there and want their share. See my other posts on the involvement of government and institutionalized investors. As crypto becomes more mainstream, the IRS is slowly catching on and catching up.
I just made a little bit of money, does the IRS really care about that? Yes, you always need to report (while you might not always owe) on any realized gain. This question may come from people misunderstanding the 600 dollar rule. For example, if gambling, you are only automatically reported when winning over 600 dollars, but, you are still are responsible for all earnings even if you don’t hit a onetime 600 dollar, or more, jackpot.
Can I just say I didn’t know about these tax implications? I guess you can say anything you want, but, it is pretty clearly stated on US tax forms as of this year. It is hard to miss and the major tax software platforms are on top of this, as well.
Do you owe taxes if you sell your Crypto? Yes. Depending on how long you owned it will affect the rate, less than a year would mean capital gains. If you sold for a loss, that would actually help your overall tax bill.
Do you owe taxes if you use BTC to buy something? Yes, the IRS considers that the same as selling.
Do you owe taxes if you trade one crypto for another? Yes, on whatever the increased value is. If you bought 1000 dollars’ worth of BTC and traded it for 1500 dollars’ worth of ETH, you would have 500 dollars’ worth of gain.
If you have crypto as income, do you owe? Yes, such as from mining, airdrops or if you were paid in crypto. Pretty much if you acquired crypto without paying for it directly with USD.
You get the picture, basically, if you come out ahead, you will need to pay taxes.
Is there anything you don’t owe the IRS for? Sure. Buying crypro in USD, giving away crypto (there are limits) donating crypto and simply transferring crypto between wallets.
I was hacked, how does this affect my taxes? Well, if anything good came from this, you get to use this as a tax loss. Also includes losing crypto and theft.
Is it hard to report crypto on your taxes? Not really, for example, Turbotax will allow you to import 2251 transactions through a .csv file and they do the rest. If you have more than that amount of transactions, then it does get tricky.
This is a pretty basic rundown, but, let me know what you think. I can get a little more detailed with the this type of post, if there is a need. Thanks for reading and please check with a tax professional if you have concerns, as I am just some random guy on the internet.