IRS Breaks Silence on Staking Income
The IRS has finally issued guidance on staking income. They state that cash-basis taxpayers must report the staking rewards when they have gained full dominion
November 24, 2023
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Get expert advice from a CPA who is highly experienced in cryptocurrency taxation. Our team can help you assess your current tax situation, navigate complicated crypto issues, and identify tax reduction strategies.
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Hi! I’m Micah and I am a CPA and cryptocurrency tax expert. Blockchain is an emerging market and moves at lightning speed. Because of this, very few people – including most CPAs – understand how it is taxed. But I LOVE crypto and am involved in it daily – both as an investor and an accountant. We can help you to understand how crypto is taxed. And more importantly, we’ll help you reduce the taxes you’ll pay on your income.
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Rules for cryptocurrency and other digital assets are rapidly changing and confusing. And as such end up being a big source of stress for many investors. They do not understand the rules surrounding crypto taxation. And what they do learn may be outdated within a few months.
And worst yet, not understanding those rules can get you in major trouble with the IRS and cost you A LOT of money
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Are you wondering if you really need to pay Bitcoin taxes or other cryptocurrency taxes, especially if you only made a very small profit? We can assure you: it’s better to be safe than sorry! The IRS is ramping up reporting requirements across the board, increasing the chances of audits and automated flagging if you do not report your crypto transactions. The IRS has made it clear that it is serious about crypto tax. We can help you make sure you’re complaint all while minimizing your tax bill.
In the simplest terms, if you sold Bitcoin, it is now considered a capital gain or loss. If you sold the Bitcoin for a profit, it is a capital gain. In this case, you will likely owe the government money. If you sold the Bitcoin at a loss, it is a capital loss. In this case, you will be eligible for a deduction.
This may be the only scenario where you do not need to report your purchase with the IRS. If you purchased Bitcoin and then maintained that holding, you will not owe Bitcoin taxes on the transaction or the currency itself.
The exact tax status of the payment will influence the forms you need to file. If you paid an established employee, this falls under the scope of a W-2. On the other hand, if your business employed a contractor and paid in cryptocurrency, you must issue a 1099.
Unsurprisingly, you must report this on your return. According to current crypto tax regulations, you are obligated to treat your crypto income exactly as you would with regular income. As with fiat currency, your federal tax rate will then vary based upon income bracket.
As the gifter of cryptocurrency, gift tax rules apply and gift tax returns may need to be filed. Significant tax planning opportunities exist around gifting cryptocurrency.
As the donor of cryptocurrency, you may be eligible for a tax deduction due to your charitable giving of donations.
In the simplest terms, if you sold Bitcoin, it is now considered a capital gain or loss. If you sold the Bitcoin for a profit, it is a capital gain. In this case, you will likely owe the government money. If you sold the Bitcoin at a loss, it is a capital loss. In this case, you will be eligible for a deduction.
This may be the only scenario where you do not need to report your purchase with the IRS. If you purchased Bitcoin and then maintained that holding, you will not owe Bitcoin taxes on the transaction or the currency itself.
The exact tax status of the payment will influence the forms you need to file. If you paid an established employee, this falls under the scope of a W-2. On the other hand, if your business employed a contractor and paid in cryptocurrency, you must issue a 1099.
Unsurprisingly, you must report this on your return. According to current crypto tax regulations, you are obligated to treat your crypto income exactly as you would with regular income. As with fiat currency, your federal tax rate will then vary based upon income bracket.
As the gifter of cryptocurrency, gift tax rules apply and gift tax returns may need to be filed. Significant tax planning opportunities exist around gifting cryptocurrency.
As the donor of cryptocurrency, you may be eligible for a tax deduction due to your charitable giving of donations.
Being the emerging market that it is, the tax issues affecting cryptocurrencies are constantly changing.
Most CPAs are pretty old school and have no concept of how blockchain works – and that’s assuming they even understand what it is! And because of that, a lot of money ends up being left on the table. Here are seven of the most common mistakes and misconceptions people have when it comes to crypto and taxes.
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The IRS has finally issued guidance on staking income. They state that cash-basis taxpayers must report the staking rewards when they have gained full dominion
The IRS has finally broken its silence on the taxation of nonfungible tokens (NFTs) – at least partially. Notice 2023-27 gives us some indication of
The IRS has stated that a decline in the value of a cryptocurrency or NFT does not qualify as a loss under IRC section 165.
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