Crypto taxes: common questions answered

For those beginners who are stepping into the cryptocurrency market, dealing with crypto taxes can be quite confusing. Hence for those people who are eager to enter the cryptocurrency industry, they should be aware of the taxes too. Yes, cryptocurrencies are taxable, no doubt.  Here are common questions answered regarding crypto taxes.

  • Are there any taxes on cryptocurrency trading?

For tax purposes, cryptocurrency is not a currency but a property. It means that tax applies to all the exchanges involved with cryptocurrencies. It may include selling, buying, mining, and trading crypto-coins. An investor needs to show every transaction to the IRS annually that includes cost basis, sales price, and capital gain/loss.

  • If I’m a HODLer, do I still need to pay taxes?

Although both HODLers and active traders need to report all information regarding their trading, there is an advantage for long-term investors. The taxes applied for buying and holding crypto coins for a very long time are 0%, 10%, and 20% depending on investment and profit, while active traders are required to pay taxes daily.

  • Do I need to report my cryptocurrency trades to IRS?

The answer is yes. If you fail to report to the IRS, this can lead to tax debt, fines, interests, and even criminal prosecutions. Even for people who don’t understand the crypto tax system.

  • What is the method of reporting cryptocurrency trades on tax returns?

You need to collect all your transaction history and send it to the IRS through secure file transfer or using an API. After checking all the information provided by you, the IRS will calculate any tax applied. Then IRS will send you a report of your tax return as proof.

  • Is mining cryptocurrencies taxable?

Text Box: Advantage:
Your cost basis will remain the same amount you initially reported as income, even if you sell the crypto coins later.

Yes, mining the cryptocurrencies is taxable as income. Hence, you have to find the fair market value of any cryptocurrency you got from mining, airdrop, or payment. Then you can report it to IRS for a tax return.It also clarifies one more question related to the topic of crypto taxes: common questions answered.

Advantage:

Your cost basis will remain the same amount you initially reported as income, even if you sell the crypto coins later

  • What should I do if I haven’t reported any crypto taxes from the past?

In this situation, you should call a tax attorney who can deal with crypto taxes, to avoid cryptocurrency audit or even worse scenarios. You can get your cryptocurrency history rebuild. It will help you to get your tax return from the IRS.

  • Is it necessary to report capital losses?

It is also an important question related to the topic crypto taxes: common question answered. Capital losses do not carry any taxes. But still, you need to report these as well to the IRS. Although it is a requirement from the IRS, it can benefit you too. You can lower the amount of taxes you owe in the future by harvesting your crypto losses.