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<ul class="summary-list"><li>The IRS considers <keyword id="6354947" type="UNKNOWN" weightage="60" keywordseo="bitcoin">Bitcoin</keyword> to be property rather than money, so transactions are subject to the same tax treatment as other investments.</li><li><keyword id="10406464" type="UNKNOWN" weightage="60" keywordseo="bitcoin-taxes">Bitcoin taxes</keyword> can be triggered by trading, exchanging, or simply spending the cryptocurrency, so documenting everything is essential. </li><li>Bitcoin is taxed at the special <keyword id="173153" type="ORGANIZATION" weightage="60" keywordseo="capital-gains-tax">capital gains tax</keyword> rate, which is often less than the ordinary income tax rate.</li></ul>Bitcoin seems to be everywhere these days. From its <a href="https://www.businessinsider.com/bitcoin-history-cryptocurrency-satoshi-nakamoto-2017-12" target="_blank" rel="noopener">mysterious origins in 2008</a>, it has grown into a widely accepted currency, used for everything from investing to shopping to employees' wages. But many Bitcoin users don't realize that buying/selling, exchanging, and even using Bitcoin to pay for things has tax implications. Yes, you read that last phrase right. In some cases, just spending your Bitcoin could be considered a profitable investment - and taxable.From how exactly it's taxed to how to prepare for filing, here's what you need to know about Bitcoin taxes. <h2>How Bitcoin is taxed </h2>Bitcoin and its comrade cryptocurrencies (Ethereum, Ripple, Tether, and Litecoin) appeal to users because they are secure and provide a degree of anonymity. It's that anonymity, along with the growing value of cryptocurrency transactions taking place worldwide, that has increasingly drawn attention from the Internal Revenue Service (IRS) in recent years.Since you can use Bitcoin and other cryptocurrencies for everything from online shopping to donating to charity, you might assume the IRS treats cryptocurrency like cash. That assumption can get you into hot water.According to <a href="https://www.irs.gov/pub/irs-drop/n-14-21.pdf" target="_blank" rel="noopener">IRS Notice 2014-21</a>, the IRS classifies cryptocurrencies as property, not cash or currency. That means it treats Bitcoin transactions like sales of stocks and other investments. Purchasing cryptocurrency with cash and holding on to it isn't a taxable transaction, but selling, exchanging, or using it to purchase goods and services is.For example, say you purchase 10 crypto coins for $10 (basically, $1 apiece) on December 1, 2020, and load them onto a cryptocurrency debit card. On December 20, 2020, that cryptocurrency is trading for $5 per coin, up from the $1 per coin you paid for it back at the beginning of December. On that day, you use your cryptocurrency debit card to pay for a $5 cup of coffee.On your 2021 tax return, you are supposed to report a $4 short-term capital gain ("short-term" because it happened within one year). That's the $5 per coin value you received when you purchased the cup of coffee, minus your $1 per-coin basis (what you paid for it) in the cryptocurrency. That's a level of record keeping that few taxpayers are willing to keep up with - if they're aware of the requirement at all.<h2>Why is Bitcoin taxed?</h2>According to a survey conducted by The Harris Poll on behalf of Blockchain Capital, roughly <a href="https://medium.com/blockchain-capital-blog/bitcoin-is-a-demographic-mega-trend-data-analysis-160d2f7731e5" target="_blank" rel="noopener">9% of American adults own Bitcoin</a>. However, the IRS estimates that only a tiny percentage of them report crypto-related gains and losses on their tax returns.In 2017, the <a href="https://www.scribd.com/document/342374347/IRS-Affidavit-for-Coinbase" target="_blank" rel="noopener">IRS</a> searched its database for the 2013 through 2015 tax years. It found:<ul><li>807 individuals reported cryptocurrency transactions in 2013</li><li>893 individuals reported cryptocurrency transactions in 2014</li><li>802 individuals reported cryptocurrency transactions in 2015</li></ul>That discrepancy is why <a href="https://www.thetaxadviser.com/issues/2020/feb/guidance-enforcement-virtual-currencies.html" target="_blank" rel="noopener">the IRS is making cryptocurrency taxes an enforcement priority</a> in 2021. In fact, Form 1040 for the 2020 tax year includes a question about cryptocurrency on the front page. It asks whether you've received, sold, sent, exchanged or otherwise acquired a financial interest in any virtual currency. If you check "no" to this question when you did, in fact, engage in cryptocurrency transactions, the IRS can consider that a willful attempt to avoid taxes, and you could face harsher penalties if the IRS uncovers your omission.<h2>How to prepare and report Bitcoin tax filing</h2>The IRS taxes Bitcoin as an investment. That means it's subject to the same tax rate of <a href="https://www.businessinsider.com/what-are-capital-gains" target="_blank" rel="noopener">capital gains and losses</a> that other financial assets are subject to when you sell any holdings in it, realizing a profit or loss. <h3>Step 1: Gather information for Bitcoin tax reporting</h3>For each transaction, you need to know the following:<ul><li>The amount (in dollars) you spent to buy the cryptocurrency</li><li>The date you purchased (or received) them</li><li>The date you sold or exchanged the coins</li><li>The amount in dollars the cryptocurrency was worth when you sold it (or value you received in the exchange)</li></ul>When you sell stocks, at the end of the year, your broker will send you a Form 1099-B that includes all of the necessary information to report those sales on your tax return. But don't expect the same service from a cryptocurrency exchange. Most crypto exchanges only send 1099 forms to customers with gross payments over $20,000 or more than 200 cryptocurrency transactions during the year.However, you can typically generate reports through your cryptocurrency exchange platform that will include all buys, sells, sends, and receipts of cryptocurrency from the account. If all of your cryptocurrency transactions take place on one exchange, gathering the information you need for tax reporting should be relatively easy. If your cryptocurrencies are scattered across several exchanges, you'll need to download separate reports from each of them.<h3>Step 2: Calculate your Bitcoin gains and losses</h3>Once you have all of the information on your cryptocurrency activity during the year, you need to determine whether you incurred a gain or loss on each transaction. To do this, you'll need to decide which method you'll use to value the cryptocurrencies you sell. Your options are:<ul><li>First-in-first-out (FIFO). The coins you purchase first are the ones you sell first.</li><li>Specific identification. You select which coins you're disposing of in each transaction.</li></ul>The method you choose can greatly impact the amount of taxes you end up owing in a particular year.Say you purchase 100 crypto coins for $1 each on January 1, 2021, and another 100 coins for $20 each on June 1, 2021. On February 1 of the following year, you sell 40 coins for $15 each.Using the FIFO method assumes the 40 coins sold came from the January 2021 lot. As a result, you would have a long-term gain of $560. That's 40 coins at $15 each less 40 coins at $1 each, or $600 - $40 = $560. Using the specific identification method, you could decide that the four coins sold in February of 2022 came from the lot purchased in June of 2021. In that case, you would have a short-term loss of $200. That's 40 coins at $15 each less 40 coins at $20 each, or $600 - $800 = -$200. Some cryptocurrency exchanges provide a gain/loss report. However, these reports are typically only provided on the FIFO method, so you won't be able to benefit from using the specific identification method if you rely on them. <h3>Step 3: Report your Bitcoin transactions </h3>Capital gain transactions are reported on <a href="https://www.irs.gov/pub/irs-pdf/f8949.pdf" target="_blank" rel="noopener">IRS Form 8949</a>. The form is divided into two sections: <ul><li>Cryptocurrencies held for one year or less go in the short-term section. Short-term gains are taxed at the same rates as ordinary income, with the top rate being 37%.</li><li>Cryptocurrencies held for longer than one year go in the long-term section. Long-term gains qualify for more favorable long-term capital gains rates, which cap out at 20%. </li></ul>Include your totals from Form 8949. If you sold other non-crypto investments, report those on a separate Form 8949. Carry the totals from all 8949 forms to <a href="https://www.irs.gov/pub/irs-pdf/f1040sd.pdf" target="_blank" rel="noopener">IRS Schedule D</a>.<h2>The financial takeaway</h2>You might have figured that investing in Bitcoin could have tax implications, especially if you make a profit on it. But it might surprise you to know that just spending your Bitcoin could trigger that taxable profit. Purchasing cryptocurrency with cash and holding on to it isn't a taxable transaction, but selling, exchanging, or using it to purchase goods and services is.Tracking the ins and outs of cryptocurrency transactions can be challenging. If you own cryptocurrency and have many transactions, it's a good idea to talk to a CPA or other tax professional familiar with cryptocurrency tax reporting. They may be able to recommend software to help track transactions and ensure you're properly accounting for them on your tax return.<h2>Related Coverage in <a href="https://www.businessinsider.com/investing-reference" target="_blank" rel="noopener">Investing</a>:</h2><h3><a href="https://www.businessinsider.com/what-are-alternative-investments" target="_blank" rel="noopener">Alternative investments are exotic assets that can diversify your portfolio - here are the five major kinds and everything you should know about them</a></h3><h3><a href="https://www.businessinsider.com/what-are-liquid-assets" target="_blank" rel="noopener">What are liquid assets? A guide to the investments that are easiest to cash in, and why they're important</a></h3><h3><a href="https://www.businessinsider.com/how-to-diversify-portfolio" target="_blank" rel="noopener">How to diversify your portfolio to limit losses and guard against risk</a></h3><h3><a href="https://markets.businessinsider.com/currencies/news/stock-market-outlook-bitcoin-portfolio-crypto-skeptic-investing-bernstein-2020-12-1029854263" target="_blank" rel="noopener">'I have changed my mind': A top market strategist and long-time crypto skeptic explains why he now believes bitcoin should be in investor portfolios</a></h3><h3><a href="https://www.businessinsider.com/cointracker-crypto-tax-startup-seeded-by-reddit-cofounder-and-serena-williams-2019-10" target="_blank" rel="noopener">Reddit cofounder Alexis Ohanian and tennis star Serena Williams backed a startup which helps people calculate taxes on crypto, without seeing a pitch deck</a></h3>

Bitcoin taxes: Understanding the rules and how to report cryptocurrency on your return

<ul><li>Government is planning to bring changes to income tax laws to bring cryptocurrencies under the tax net in Budget 2022.</li><li>Also, it is likely to introduce a bill on cryptocurrencies during the Winter Session of Parliament.</li><li>This comes amid a rising number of advertisements, featuring even film stars, promising easy and high returns on investments in cryptocurrencies.</li></ul>The government is mulling changes in the income tax laws to bring cryptocurrencies under the tax net, with some changes that could form part of the budget next year, a top official said. Revenue secretary <keyword id="947916" type="General" weightage="20" keywordseo="tarun-bajaj" source="Orion">Tarun Bajaj</keyword> said that in terms of income tax, some people are already paying capital gains tax on the income from cryptocurrency, and in respect of goods and services tax (GST) also the law is "very clear" that the rate would be applicable as those in case of other services. <cmsannotation type="cmsannotation" annotationid="wazirx" comment="wazirx" text="wazirx">wazirx</cmsannotation> "We will take a call. I understand that already people are paying taxes on it. Now that it has really grown a lot, we will see whether we can actually bring in some changes in law position or not. But that would be a budget activity. We are already nearing the budget, we have to look at that point of time," Bajaj told PTI in an interview. Asked if a provision of TCS (tax collected at source) could be introduced for crypto trading, the secretary said "if we come up with a new law then we will see what is to be done". "But yes, if you make money you have to pay taxes... We have already got some taxes, some have treated it as an asset and paid capital gains tax on it," he said. Asked whether people involved in cryptocurrency trading would be categorized as facilitator, brokerage and trading platform and how the taxation would be done under GST, Bajaj said "there would already be such things available in other services also. So whatever GST rate they are taxed at, that will be applicable on them." "They have to get themselves registered. The GST law is very clear. If there is an activity, if there is a broker who is helping people and charging brokerage fee, GST would get charged," he said. Separately, the government is likely to introduce a bill on cryptocurrencies during the Winter Session of Parliament beginning November 29, amid concerns over such currencies being allegedly used for luring investors with misleading claims. Notably, there have been a rising number of advertisements, featuring even film stars, promising easy and high returns on investments in cryptocurrencies in recent times. Currently, there is no regulation or any ban on use of cryptocurrencies in the country. Against this backdrop, Prime Minister Narendra Modi, last week, held a meeting on cryptocurrencies with senior officials and indications are that strong regulatory steps could be taken to deal with the issue. Earlier this week, the Standing Committee on Finance, chaired by BJP member Jayant Sinha, met the representatives of crypto exchanges, block chain and Crypto Assets Council (BACC), among others, and arrived at a conclusion that cryptocurrencies should not be banned, but it should be regulated. The RBI has repeatedly reiterated its strong views against cryptocurrencies saying they pose serious threats to the macroeconomic and financial stability of the country and also doubted the number of investors trading on them as well as their claimed market value. RBI governor Shaktikanta Das too earlier this month had reiterated his views against allowing cryptocurrencies saying they are a serious threat to any financial system since they are unregulated by central banks. The Supreme Court in early March 2020, had nullified the RBI circular banning cryptocurrencies. Following this on February 5, 2021, the central bank had instituted an internal panel to suggest a model of the central bank's digital currency. The RBI had announced its intent to come out with an official digital currency, in the face of proliferation of cryptocurrencies like Bitcoin about which the central bank has many concerns. Private digital currencies/virtual currencies/crypto currencies have gained popularity in the past one decade or so. Here, regulators and governments have been sceptical about these currencies and are apprehensive about the associated risks. It can be noted that on March 4, 2021, the Supreme Court had set aside an RBI circular of April 6, 2018, prohibiting banks and entities regulated by it from providing services in relation to virtual currencies. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/phonepe-announces-esop-buyback-worth-135-crore-for-employees/articleshow/87802097.cms">PhonePe announces ESOP buyback worth ₹135 crore for employees</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/cryptocurrency/news/what-is-bitcoin-golden-cross-and-death-cross/articleshow/87796591.cms">Bitcoin investors love the golden cross and death cross — here’s why they matter but there are other factors to keep in mind</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/mindhouse-raises-6-million-in-seed-funding-led-by-binny-bansal/articleshow/87798613.cms">Flipkart's Binny Bansal bets on Zomato cofounder's two-year-old venture</a>

Government plans to tax cryptocurrency gains in Budget 2022

<div class="KonaFilter image-container display-table"><div><div class="image on-image">Thomson ReutersA general view of the U.S. Internal Revenue Service (IRS) building in Washington</div></div></div><ul><li>On Monday, the IRS launched a joint, international effort to investigate cryptocurrency-related tax crimes and money laundering.</li><li>Titled the Joint Chiefs of Global Tax Enforcement (J5), the coalition includes government agencies from Australia, Canada, the Netherlands, the United Kingdom, and the United States.</li><li>J5 was formed in response to the Organisation for Economic Co-operation and Development's request for an international effort to curb tax crime. </li></ul>The Internal Revenue Service is taking an international approach to cryptocurrency-related crime.In response to a request by the Organisation for Economic Co-operation and Development to reduce tax crime, the IRS <a href="https://www.irs.gov/compliance/joint-chiefs-of-global-tax-enforcement">formed the Joint Chiefs of Global Tax Enforcement (J5)</a>, a coalition between five countries aimed at investigating cryptocurrency crimes, including tax fraud and money laundering.J5 includes agencies from Australia, Canada, the Netherlands, and the United Kingdom, as well as the IRS. The agencies will both share information and conduct investigations together, in an effort to "reduce the growing threat posed to tax administrations by cryptocurrencies and cyber crime," the IRS said. Cryptocurrency allows for easy international transfers, which is a cause for concern among government agencies due to the difficulty of investigating and prosecuting cryptocurrency-related crimes. Don Fort, chief of IRS-CI, explained the decision for an international effort <a href="https://www.forbes.com/sites/kellyphillipserb/2018/07/02/irs-ci-joins-effort-to-fight-international-tax-cryptocurrency-and-financial-crimes/#5b4f9b1112cc">to Forbes</a>:"We cannot continue to operate in the same ways we have in the past, siloing our information from the rest of the world while organized criminals and tax cheats manipulate the system and exploit vulnerabilities for their personal gain," Fort said. "The J5 aims to break down those walls, build upon individual best practices, and become an operational group that is forward-thinking and can pressurize the global criminal community in ways we could not achieve on our own." <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/everything-wrong-google-android-fix-2018-6">Everything wrong with Android</a></h3> <div> </div> </div>

The IRS just launched an international coalition to investigate cryptocurrency tax crime

<ul class="summary-list"><li>The <keyword id="698888" type="COMPANY" weightage="60" keywordseo="Australian-Tax-Office">Australian Tax Office</keyword> has urged investors to report returns made on <keyword id="6357017" type="DEFINITION" weightage="60" keywordseo="cryptocurrency">cryptocurrency</keyword>, news.com.au reported. </li><li><keyword id="2721952" type="PERSON" weightage="60" keywordseo="crypto">Crypto</keyword> is classed as a taxable asset in Australia, which many investors are unaware of. </li><li>Despite anonymity being a key component of crypto, investments are tracked by authorities. </li></ul>Australian crypto investors must report their profits to the Australian <keyword id="45031" type="PERSON" weightage="60" keywordseo="Tax">Tax</keyword> Office or risk penalties for tax evasion, assistant commissioner Tim Loh told <a href="https://www.news.com.au/finance/money/tax/tax-returns-how-the-ato-will-target-cryptocurrency-investors/news-story/e4f275d02bd5eb0e0ee773b9e2f9642e">news.com.au</a>. Crypto is classed by the ATO as an asset, not a currency, and so is taxable - something many investors are unaware of, he said. The ATO will contact around 400,000 people in 2021 to ask them to review their previous statements about cryptocurrency investments or to divulge the profits and losses they made on these, news.com.au reported.Crypto assets and investments are treated in the same way as shares under the capital gains tax framework, and Loh said he was "alarmed" about how few taxpayers knew this. Any time a cryptocurrency is traded for a fiat currency or another cryptocurrency, tax laws apply. The same is true if it is used to purchase, sell or swap non-fungible tokens.Anonymity of ownership is a key component of cryptocurrency systems and has helped drive its popularity. But Australian authorities have been able to track crypto investments by comparing tax return details with data provided by crypto exchanges, banks and other financial institutions, Loh said, meaning the authorities know who has invested."There isn't a game of hide and seek. We have got that information and all we are asking people to do is follow the rules.", Loh told news.com.au. The recent slump and volatility in cryptocurrency prices has been attributed, in part, to repeated warnings from government officials that they will get tougher on enforcement of <keyword id="9546806" type="UNKNOWN" weightage="60" keywordseo="crypto-regulation">crypto regulation</keyword>, and to their hints that tighter regulation is coming.As in Australia, US tax authorities require investors to report gains and losses on crypto, which the Internal Revenue Service likewise views as an asset. The Biden administration said earlier this week that it plans to crack down on crypto taxes and crypto-related tax evasion.

Australian crypto investors must report profits or face penalties for tax evasion, government official says

Here’s what investors need to know about the cryptocurrency tax

<ul class="summary-list"><li><keyword id="8692" type="COUNTRY" weightage="60" keywordseo="Indonesia">Indonesia</keyword> is looking to tax the trading <keyword id="2420795" type="PERSON" weightage="60" keywordseo="cryptocurrencies">cryptocurrencies</keyword>, <a href="https://www.reuters.com/article/indonesia-tax-crypto-currency/indonesia-considers-plan-to-tax-trade-in-cryptocurrencies-idUSL4N2MY0V7">Reuters reported.</a></li><li>The country has banned cryptocurrencies as a method of payment but allows them to be traded as a commodity.</li><li>The trend is growing in Indonesia but, so far, not many people trade <keyword id="2721952" type="PERSON" weightage="60" keywordseo="crypto">crypto</keyword>. </li></ul>Indonesia is looking to tax the trading cryptocurrencies, <a href="https://www.reuters.com/article/indonesia-tax-crypto-currency/indonesia-considers-plan-to-tax-trade-in-cryptocurrencies-idUSL4N2MY0V7">Reuters reported</a>, as the Southeast Asian nation moves to temper the rising popularity of the digital asset space among its locals as well as shore up some state revenue following the devastating pandemic.The largest country in the region has banned cryptocurrencies as a mode of payment but allows them to be traded as a commodity."It is important to know that...if there is a profit or capital gain generated from a transaction, the profit is an object of income tax," Neilmaldrin Noor, a spokesman at Indonesia's tax office, told Reuters. Noor however clarified that a tax scheme for cryptocurrency was still at the discussion stage.The country's <a href="https://www.loc.gov/law/help/cryptoassets/indonesia.php#IV">Financial Services Authority has warned Indonesians</a> on the risks of cryptocurrencies, particularly around their price volatility.In Indonesia, the world's fourth most populated nation with 275 million people, many use Indodax, a cryptocurrency exchange platform that claims to be the largest in the country, Reuters reported.Indodax in April said the number of active members on its platform hit three million, rising from around 2.3 million at the start of the year.Cryptocurrency transactions in the country are considered to be small, mainly due to the lack of education among the general population, CEO of Indodax, Oscar Darmawan, in an April statement, reported by <a href="https://en.tempo.co/read/1452558/indodax-ceo-explains-bitcoin-transaction-surge-in-indonesia">Tempo.Co</a>.Darmawan did add that the number of transactions is growing, moving up in tandem with the global market.Worldwide, cryptocurrencies have soared in 2021 - with <a href="https://markets.businessinsider.com/currencies/btc-usd?utm_source=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingestm=ingest" target="_blank" rel="noopener">bitcoin</a> rising 95% year to date, <a href="https://markets.businessinsider.com/currencies/etc-usd?utm_source=markets&amp;utm_medium=ingestgest" target="_blank" rel="noopener">ether</a> surging 380%, and <a href="https://markets.businessinsider.com/currencies/doge-usd?utm_source=markets&amp;utm_medium=ingestgest" target="_blank" rel="noopener">dogecoin</a> skyrocketing an astounding 13,000%.

Indonesia explores taxing crypto profits amid a surge in popularity among locals

<ul class="summary-list"><li><keyword id="10871093" type="UNKNOWN" weightage="60" keywordseo="crypto-art">Crypto art</keyword> is taxed when it is purchased and sold, as well as through the cryptocurrencies used to buy the <keyword id="902592" type="PERSON" weightage="60" keywordseo="NFTS">NFTs</keyword>.</li><li>NFTs are not yet subject to the same sales <keyword id="6368033" type="UNKNOWN" weightage="60" keywordseo="taxes">taxes</keyword> as physical art pieces.</li><li>After his $70 million <keyword id="4668945" type="PERSON" weightage="60" keywordseo="nft">NFT</keyword> sale, Beeple likely faces taxes worth tens of million of dollars.</li></ul>While crypto art sales have boomed in the past month, catching the national spotlight with flashy price tags, what many buyers and sellers might not realize is that <a href="https://www.businessinsider.com/what-does-nft-mean-crytpo-non-fungible-tokens-art-explained-2021-2">non-fungible tokens or NFTs can generate a large tax bill.</a>In March, a crypto art piece by digital artist Mike Winkelmann, also known as <a href="https://www.businessinsider.com/art-auction-nft-beeple-top-selling-most-expensive-sale-millions-2021-3">Beeple, made history when it sold for nearly $70 million</a>. When told how he would be taxed on the sale, Winkelmann expressed surprise. "Holy s---, that's a lot of taxes," Winkelmann told CNBC.Winkelmann may be facing a tax bill worth tens of millions of dollars. As an artist, Winkelmann will also have to pay federal and state income taxes on his earnings from the sale, in addition to reporting the <keyword id="6357017" type="DEFINITION" weightage="60" keywordseo="cryptocurrency">cryptocurrency</keyword> gains on his 2020 tax return.The Internal Revenue Services sees buying and selling NFTs as a realization of investment gains, and therefore subject to the <a href="https://www.investopedia.com/terms/c/capital_gains_tax.asp">capital gains tax.</a>There are multiple ways you can get taxed when buying and selling an NFT. Capital gains taxes apply to NFTs, in much the same way they apply to selling stocks. However, because NFTs are considered collectibles they are also taxed at an even higher rate of 28%.NFT buyers and sellers also need to be aware of how the cryptocurrency they used to buy the NFT will be taxed.Most crypto-art pieces are bought using digital currencies, including <keyword id="6709758" type="UNKNOWN" weightage="60" keywordseo="Ether">ether</keyword> and WAX. These cryptocurrencies are also subject to a capital gains tax, depending on how much they've gained in value since they were originally purchased and how long the buyer held the digital currency.If the buyer held the cryptocurrency for over a year, they would be subject to a long-term capital gains tax. Long-term capital gains are taxed at 15% for individuals who earn between $40,000 and $441,000 - and 20% for individuals that make more than that amount. Holding the digital asset for less than a year will create a short-term capital gain, which is based upon the <a href="https://www.businessinsider.com/personal-finance/effective-tax-rate-quarterly-taxes-small-business-2020-6" target="_blank" rel="noopener">effective tax rate</a> for the taxpayer.In short, NFT buyers and sellers will be taxed when purchasing an NFT using a digital currency, selling an NFT for another NFT, selling an NFT for a cryptocurrency, as well as when converting the cryptocurrency used to buy and sell the item back into US dollars.On the other hand, NFTs are not yet subject to the sales tax that would be applied to a physical piece of art - an issue that art law expert Diana Wierbicki told <a href="https://news.artnet.com/market/nft-taxes-1953726">ArtNet</a> state tax laws could soon catch up to.The IRS has been<a href="https://www.cnbc.com/2021/02/24/failure-to-report-crypto-on-tax-returns-can-lead-to-trouble-with-irs.html"> cracking down on cryptocurrencies in recent month</a>s. This year, the IRS put a question about crypto investments on the first page of 2020 tax returns. People that fail to report digital assets or attempt to hide them could face serious penalties from the IRS.Many NFT buyers and sellers likely do not know the hefty tax fees they will face. Shehan Chandrasekera, head of tax strategy at CoinTracker, <a href="https://www.cnbc.com/2021/03/17/tax-surprise-looms-for-nft-investors-who-use-crypto-.html">told CNBC</a> that there's so many unknowns when it comes to the emerging market of NFTs that many people probably won't know what to expect on tax day. "People's knowledge of this tax in the U.S. is very poor," he said. "I just don't think people know about it."This article was reviewed for accuracy and clarity by <a href="https://folafinancial.com/" target="_blank" rel="noopener noreferrer">Sheneya Wilson</a>, an expert on Personal Finance Insider's <a href="https://www.businessinsider.com/personal-finance/tax-review-board-experts" target="_blank" rel="noopener noreferrer">tax review board</a>.

Crypto-art investors could face a surprise on tax day since NFTs can lead to a hefty tax bill

<ul><li>The <keyword id="6557524" type="ORGANIZATION" weightage="20" keywordseo="central-board-for-indirect-taxes-and-customs">Central Board for Indirect Taxes and Customs</keyword> is proposing to tax earnings from cryptocurrency transactions at 18%. </li><li>Under the regulator’s proposal cryptocurrencies are to be designated as “intangible goods”. </li><li>This should a welcome relief for <keyword id="6354947" type="UNKNOWN" weightage="20" keywordseo="bitcoin">Bitcoin</keyword> traders and miners. By bringing digital currencies into the tax net, the government is legitimising trade in them. </li></ul>After months of confusion over their legal status, it seems the Indian government is planning to regulate the trading of digital currencies like Bitcoin and Ethereum under the Goods and Services Tax (GST) regime. The logic is simple - if people are making money from it, it is a taxable event. Anonymous sources told Bloomberg that profits from digital currency transactions could soon fall <a href="https://www.bloombergquint.com/gst/2018/05/23/india-mulls-gst-on-trading-of-virtual-currencies#gs.aaNCbqA">under the 18% tax slab</a> - the same rate as software and electrical devices - if the Central Board for Indirect Taxes and Customs (CBITC) has its way. This is a little less than the tax rate in the US, where traders are expected to pay 20% on their earnings if they’ve held their digital currency for longer than a year. Barring the tax level, details on how the trade of these currencies would be regulated in India weren’t revealed. And there is no clarity on their status as legal tender. However, the CBITC’s draft framework contained a number of key proposals. Firstly, cryptocurrencies are to be designated as “intangible goods” while the processes involving their mining, storage and transfer will be designated “services”. As a result, cryptocurrency exchanges will have to pay taxes on commissions earned. Secondly, the value of a cryptocurrency will primarily be denominated in rupees. Thirdly, transactions that involve a party outside India will designated as imports in the case of a purchase and exports in case of a sale. Finally, trading profits could be liable for retrospective <keyword id="6383566" type="UNKNOWN" weightage="20" keywordseo="taxation">taxation</keyword> from the date of the GST’s implementation - July 1st, 2017. This could result in quite a revenue haul for the government. In January, Reuters reported that trading volumes in India were increasing by about <a href="https://www.reuters.com/article/us-markets-bitcoin-india-taxes/india-sends-tax-notices-to-cryptocurrency-investors-as-trading-hits-3-5-billion-idUSKBN1F8190?utm_campaign=trueAnthem:+Trending+Content&amp;utm_content=5a63607f04d3013aee752148&amp;utm_medium=trueAnthem&amp;utm_source=twitter">₹20 billion every month.</a> A step in the right direction The news is likely a welcome relief for Bitcoin traders and miners. By bringing digital currencies into the tax net, the government is legitimising trade in them. It could also encourage more people to take part in the trading of these currencies. The next step after taxation, however, is preventing the misuse of digital currencies and tax evasion. Last month, the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> cracked down on cryptocurrency transactions, <a href="https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR264270719E5CB28249D7BCE07C5B3196C904.PDF">barring any regulated entities like banks from facilitating them</a> after three months. The move was in response to concerns that money was being laundered through digital currency trades and the profits from such trades could be used to finance illegal activities. The order is currently <a href="https://www.bloombergquint.com/law-and-policy/2018/04/22/rbi-circular-barring-banking-service-for-virtual-currencies-challenged-in-court#gs.3TQyKdU">being challenged in court</a>. Should the proposal to tax cryptocurrency trading under the GST regime be approved by the <keyword id="6355040" type="ORGANIZATION" weightage="20" keywordseo="GST-Council">GST Council</keyword>, then it will likely cause the RBI to revoke its outright ban. This would be a win for the government, because if the formal banking system were to embrace cryptocurrency trading, it would bring these transactions right under regulators’ noses and away from the peer-to-peer unregulated market.

India might charge goods and services tax for cryptocurrency dealings

<ul class="summary-list"><li>The <keyword id="6359816" type="UNKNOWN" weightage="60" keywordseo="irs">IRS</keyword> wants more Congressional authority to conduct tax-collection operations for <keyword id="2420795" type="PERSON" weightage="60" keywordseo="cryptocurrencies">cryptocurrencies</keyword>, the agency's commissioner said Tuesday. </li><li>Commissioner Charles Rettig said the IRS needs a stronger hand to crack down on fraud. </li><li>A 2022 budget proposal calls for the agency to receive $41 million to expand efforts to tackle cybercrime. </li></ul>The <keyword id="6555575" type="ORGANIZATION" weightage="60" keywordseo="internal-revenue-service">Internal Revenue Service</keyword> is asking US lawmakers to give the agency more authority and funding to regulate the <keyword id="6357017" type="DEFINITION" weightage="60" keywordseo="cryptocurrency">cryptocurrency</keyword> industry. It's seeking to beef up tax collection efforts and crack down on suspected fraud, the head of the agency said at a hearing in Washington on Tuesday.IRS Commissioner Charles Rettig <a href="https://www.finance.senate.gov/">appeared before the Senate Finance Committee</a> to discuss a proposal for more funding in the government's budget for 2022. The IRS is seeking $41 million to expand efforts to tackle cybercrime and $32 million for operations related to crypto enforcement. The agency is also proposing additional information reporting for businesses that have received <keyword id="6368079" type="UNKNOWN" weightage="60" keywordseo="Crypto-assets">crypto assets</keyword> with fair market value of more than $10,000.Senator Ron Portman, a Republican from Ohio serving on the committee, asked Rettig if the agency in issues related to information reporting on cryptocurrency has the necessary authority to issue appropriate regulations."I think we need Congressional authority," Rettig said. "As you're aware, we get challenged frequently and to have a clear dictate from Congress and the authority of us to collect that information is critical," he said.Rettig's appearance comes as President Joe Biden and his administration seeks tighter regulations to deal with who they see as cryptocurrency tax evaders. The Treasury Department in May detailed plans to have any cryptocurrency transfers of at least $10,000 be reported to the IRS.Rettig noted that the market capitalization of cryptocurrencies had recently increased to more than $2 trillion and he said there are more than 8,600 exchanges worldwide."And by design, most crypto virtual currencies are designed to stay off the radar screen, so you know, we will be challenged," he said, adding that the agency currently pursues so-called John Doe summonses to track down unidentified and potential US taxpayers.Last month, a federal court in California authorized the IRS to serve a <a href="https://markets.businessinsider.com/currencies/news/irs-cryptocurrencies-seeking-taxpayer-identities-20000-kraken-john-doe-summons-2021-5-1030395224">John Doe Summons on crypto exchange Kraken</a> to seek the identities of taxpayers who exchanged cryptocurrencies worth at least $20,000 between 2016 and 2020. "We're very active in both the civil and the criminal enforcement world. We do need additional tools, we absolutely need additional resources," said Rettig.A selloff in the cryptocurrency market during recent weeks has dragged down the market cap of cryptocurrencies to about $1.51 trillion.

IRS chief asks Congress for more authority to regulate the crypto industry

<ul class="summary-list"><li>The Senate recently proposed using taxes on the cryptocurrency industry to partially fund the <keyword id="595080" type="PERSON" weightage="60" keywordseo="infrastructure-plan">infrastructure plan</keyword>.</li><li id="recirc"><a href="https://www.businessinsider.com/?hprecirc-bullet"></a>The Joint Committee on Taxation estimates that taxes on <keyword id="2721952" type="PERSON" weightage="60" keywordseo="crypto">crypto</keyword> could raise $28 billion over a decade. </li><li>It's the latest move by the government to regulate and clarify the rapidly growing cryptocurrency space.</li></ul>Strengthening tax enforcement on the cryptocurrency industry could generate billions in revenue to fund the Senate's bipartisan infrastructure package, according to government estimates. Last week, the Senate released a proposal to increase the requirements for crypto brokers and investors to report their transactions to the IRS. The tax increases could raise $28 billion to fund the infrastructure plan, according to the <a href="https://www.nytimes.com/2021/07/30/us/politics/infrastructure-deal-cryptocurrency.html?campaign_id=4&amp;emc=edit_dk_20210802&amp;instance_id=36891&amp;nl=dealbook&amp;regi_id=61427258&amp;segment_id=65129&amp;te=1&amp;user_id=6ce77f080f3d64e6312881475ed3b6767f080f3d64e6312881475ed3b676">New York Times</a>, which cited an estimate by the Joint Committee on Taxation. The tax revenue is just a small fraction of the $550 billion in federal funding Congress is seeking to build out public transit, bridges, water, and other physical projects. It's also the latest move by the government to regulate and clarify the rapidly growing cryptocurrency space. On Thursday, <a href="https://markets.businessinsider.com/news/currencies/cryptocurrency-regulation-rep-don-beyer-bill-digital-asset-market-structure-2021-7">Representative Don Beyer</a> introduced a <a href="https://beyer.house.gov/uploadedfiles/beyer_028_xml.pdf" target="_blank" rel="noopener">bill</a> in the House that aims to create a widespread framework for regulating digital assets. The bill seeks to provide a regulatory definition for the top 90% of all <keyword id="2420795" type="PERSON" weightage="60" keywordseo="cryptocurrencies">cryptocurrencies</keyword> by market capitalization.

Taxes on digital assets could raise an estimated $28 billion to help fund the sweeping infrastructure bill moving through Congress, report says

<ul class="summary-list"><li>About 14% of financial advisors are recommending their clients invest in <keyword id="11895317" type="UNKNOWN" weightage="60" keywordseo="cryptocurrencies" source="Orion">cryptocurrencies</keyword>. </li><li>Cryptocurrency investments can take advantage of a <keyword id="12243925" type="UNKNOWN" weightage="60" keywordseo="tax-loophole" source="Orion">tax loophole</keyword> legislators are working to close. </li><li>Even more wealth managers are planning to recommend investing in crypto, a report found. </li></ul>Wealth managers are helping ease their clients into the cryptocurrency market by helping them tap into a loophole that uses losses to offset <keyword id="11898253" type="UNKNOWN" weightage="60" keywordseo="taxes" source="Orion">taxes</keyword> elsewhere in their portfolios, <a href="https://www.businessinsider.com/reviews/out?u=https%3A%2F%2Fwww.wsj.com%2Farticles%2Ffinancial-advisers-pitch-bitcoin-to-investors-to-offset-portfolio-losses-11633347001%3Fmod%3Dmarkets_lead_pos6">The Wall Street Journal reported</a>.Rules against "wash sales" prevent investors from using the loophole with their stock holdings, but because cryptocurrencies are considered property by the federal government, the regulation doesn't apply the same way, the Journal report said. One financial advisor told the Journal he's "taking advantage of the volatility in crypto" to increase portfolio returns. Another advisor said his client bought $100,000 worth of <keyword id="11893902" type="UNKNOWN" weightage="60" keywordseo="bitcoin" source="Orion">bitcoin</keyword> and ether and will use his $30,000 in losses to offset taxes on profits in his portfolio, and all the while, his crypto investment has jumped 10%. A June report from the <a href="https://www.financial-planning.com/news/fpa-research-on-advisors-using-cryptocurrencies">Financial Planning Association</a> showed more and more advisors are recommending cryptocurrencies to their clients. Now, 14% of wealth managers are endorsing digital assets to investors - a jump from 1% in both 2019 and 2020. In the future, even more financial advisors are looking to jump on board, the report said. The loophole, however, could disappear if legislators pass new tax provisions that would add cryptocurrencies to wash-sale rules, in an effort to raise billions of tax dollars, <a href="https://www.bloomberg.com/news/articles/2021-09-13/house-democrats-tax-plan-hits-crypto-with-new-rules-again?sref=BWbpWjRm">Bloomberg reported previously</a>. Legislators also wrote a provision requiring crypto firms to provide user information so as to increase tax compliance and raise an estimated $28 billion over the next 10 years. But, Bloomberg reported that crypto advocates said firms can't collect such information.

Some wealth managers are helping clients take advantage of a loophole to use crypto losses to offset taxes on other assets

<div class="KonaFilter image-container display-table"><div><div class="image on-image">Alex Wong/Getty Images</div></div></div><ul><li>Cryptocurrency exchanges generally don't send customers information about potential tax liabilities.</li><li>That's leaving cryptocurrency investors confused about what they owe the IRS for their holdings. </li></ul>The bitcoin boom of 2017 minted <a href="http://www.businessinsider.com/bitcoin-billionaires-forbes-richest-people-in-cryptocrrency-2018-2" target="_blank" rel="noopener">countless new millionaires</a>, but not everyone who jumped on the bandwagon last year is currently enjoying their spoils.With the <a href="http://www.businessinsider.com/tax-day-2018-april-deadline-2017-12" target="_blank" rel="noopener">deadline for filing federal taxes</a> in the US right around the corner, cryptocurrency investors who cashed in last year may face a massive tax bill from the Internal Revenue Service.Investors are required to <a href="http://www.businessinsider.com/how-paying-taxes-on-bitcoin-works" target="_blank" rel="noopener">pay taxes on their cryptocurrency investments</a> if they sold their digital coin holdings at a higher price than they bought them. However, since many cryptocurrency exchanges don't send customers tax documents, many might not even know they have to pay taxes on their coins - or how much. Perry Woodin, the founder of Node40, a blockchain accounting company, told Business Insider this is a problem impacting a significant number of people. "Millions of people have a tax liability they don't realize or know how to get the numbers for," Woodin told Business Insider. One investor shared his story in a <a href="https://www.reddit.com/r/personalfinance/comments/84huks/i_just_discovered_that_i_owe_the_irs_50k_that_i/">Reddit</a> post that went viral:"Around December 2017, I got caught up in the altcoins frenzy and sold most of my bitcoins (about $120k worth) to buy a bunch of different coins. I didn't know this back then but it looks like I owe income taxes on those trades, which adds up to about $50k if I add up state (California) and federal."The problem is, the coins the investor swapped his bitcoin for are now only worth $30,000. And he has only an additional $5,000 in savings. "I feel like I might have accidentally ruined my life because I didn't know about the taxes," the investor concluded. Woodin told Business Insider he knew a couple that faced a similar situation. "In this case, they bought Dash real cheap at $7 and then it went to $1,600," Woodin said. "They cashed out to do $100,000 worth of home-renovations and didn't have enough to pay the tax."At first glance, it might be easy to chalk up these anecdotes as irresponsible behavior, but there are some good reasons why people are confused.Cryptocurrency exchanges, for the most part, do not send customers tax forms, <a href="https://www.investopedia.com/terms/f/form1099div.asp" target="_blank" rel="noopener">such as a 1099-DIV</a>, which inform investors how much they made from selling investments during the year. Coinbase, one of the exchanges that does send tax information to customers, only does so if you have more than $20,000 invested with the company. Without a 1099-DIV form, it's up to the investor to figure out how much they made from selling cryptocurrencies during the year, and how much they'll owe in taxes. The tax rate depends on how long the cryptocurrency was held: If it was less than one year, the investment profit is taxed just like a salary is taxed. For investments held longer than one year, capital gains tax rates apply, which are typically lower <a href="https://www.nerdwallet.com/blog/taxes/capital-gains-tax-rates/" target="_blank" rel="noopener">but can be as high as 20%</a>. So what are you to do if you are a crypto investor in a tax-related bind? The bottom-line, according to Gwen Moore, a partner at Johnson Moore, a tax consultancy, is to reach out to the IRS. "If they have a huge tax bill they can't afford, then they can get into a payment plan," she said. "There are certain programs people can get in to settle with the IRS for taxes if they can't pay." The <a href="https://www.irs.gov/payments/payment-plans-installment-agreements#q02" target="_blank" rel="noopener">IRS offers payment plans</a> at much lower interest rates than paying an unaffordable tax bill with a credit card, for example. The <a href="https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-first-quarter-of-2018" target="_blank" rel="noopener">current interest rate is 4%</a>, not including any additional <a href="https://www.irs.gov/businesses/small-businesses-self-employed/understanding-penalties-and-interest" target="_blank" rel="noopener">penalties</a>. The one thing you don't want to do is ignore the bill.For folks who have started on their taxes and want to figure out how much they might owe, <a href="https://blog.coinbase.com/new-tax-tools-on-coinbase-4d2598544d9e">Coinbase recently launched a tax calculator</a>. "People can take action to find out what their cost basis is, what the potential gain or loss would be," Moore said. If you filed without mentioning your cryptocurrency investments, it's okay, Moore says, as long as you notify the IRS and explain your situation. "They have a lot of discretion to distinguish between people who made a mistake and someone who is evading taxes," she said. "Obviously, there is a difference between someone who comes forward, explains their mistake, and someone who looks like they heard about the crackdown, and moved their crypto somewhere else."Lauren Lyons Cole contributed reporting. Get the latest Bitcoin price <a href="http://markets.businessinsider.com/currencies/BTC-USD">here.&gt;&gt;</a> <a href="http://www.businessinsider.com/intelligence/bitcoin-101?IR=T&amp;utm_source=businessinsider&amp;utm_medium=ctgr&amp;utm_term=ctgr_leadgen&amp;utm_content=fintech_ctgr_leadgen&amp;utm_campaign=fintech_ctgr_leadgen_bitcoin-101"></a> <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/goldman-sachs-outlook-for-bitcoin-and-ethereum-2018-2"> Goldman Sachs investment chief: Bitcoin is definitely a bubble, Ethereum even more so </a></h3> <div> </div> </div>

You Searched For "cryptocurrency tax" and got 12 results

Bitcoin taxes: Understanding the rules and how to report cryptocurrency on your return

Janet Berry-Johnson

Government plans to tax cryptocurrency gains in Budget 2022

PTI

The IRS just launched an international coalition to investigate cryptocurrency tax crime

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Australian crypto investors must report profits or face penalties for tax evasion, government official says

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Here’s what investors need to know about the cryptocurrency tax

Business Insider India

Indonesia explores taxing crypto profits amid a surge in popularity among locals

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Crypto-art investors could face a surprise on tax day since NFTs can lead to a hefty tax bill

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India might charge goods and services tax for cryptocurrency dealings

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IRS chief asks Congress for more authority to regulate the crypto industry

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Taxes on digital assets could raise an estimated $28 billion to help fund the sweeping infrastructure bill moving through Congress, report says

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Some wealth managers are helping clients take advantage of a loophole to use crypto losses to offset taxes on other assets

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'I feel like I might have accidentally ruined my life:' Tax season is wrapping up and bitcoin investors are freaking out

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