Most cryptocurrency investors are still not ready to file their taxes

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As the April 18 tax deadline approaches, most cryptocurrency investors are still not ready to apply, according to a survey by CoinTracker, a crypto portfolio tracking and tax software company.

As of March 27, about 96% of digital currency investors had not yet submitted their returns, the results show, and 75% are not yet ready.

One of the problems is a widespread crypto tax knowledge gap, with confusion over which activities are taxable, said Shehan Chandrasekera, CPA and head of tax strategy at CoinTracker.

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In fact, most survey respondents were unsuccessful in identifying the tax implications of several common transactions.

“We constantly see the misconception that if you didn’t cash out [U.S.] Dollars, you don’t have to report anything,” said Matt Metras, a registered agent and cryptocurrency tax specialist at MDM Financial Services in Rochester, New York.

Cryptocurrency can trigger capital gains or losses when sold or exchanged for another coin. The profit or loss is the difference between your purchase price, called the base, and the value when sold or exchanged.

You can qualify for long-term capital gains rates of 0%, 15%, or 20% if you’ve held the currency for more than a year. However, swapping assets after less than a year creates short-term capital gains at regular income tax rates of up to 37% for top earners.

This tax season, applicants must answer a yes-or-no question about “virtual currency” on the front page of their tax returns. You can answer no if you bought and held cryptocurrency in US dollars or transferred coins between your wallets.

However, you must say yes if you sold cryptocurrency, exchanged one virtual coin for another, used it to make a purchase, received it as payment, acquired it through mining or staking, and more.

Tips for spontaneous people

Because cryptocurrency exchanges are still not required to file a 1099-B, which covers gains and losses on annual transactions, calculating your tax bill can be difficult, especially with a large volume of activity.

“My advice would be to take your time and do it right,” Metras said. If you need help, chances are you won’t find a crypto tax expert before the deadline. However, if you file an extension, you’re “buying more time,” he added, to gather information and set up an appointment.

Crypto tax software can help reconcile transactions, but it may not be 100% accurate, Metras warned. “Make sure you check the things that come out of it.”

If your capital losses exceed capital gains, there’s an opportunity to write off up to $3,000 a year to offset regular income, Chandrasekera said, and if losses exceed $3,000, you can carry them forward into future years.

https://www.cnbc.com/2022/04/06/most-cryptocurrency-investors-still-arent-ready-to-file-their-taxes.html Most cryptocurrency investors are still not ready to file their taxes

Gary B. Graves

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