Most Cryptocurrency Investors 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 deposit, according to a survey by CoinTracker, a crypto portfolio tracking and tax software company.

As of March 27, some 96% of digital currency investors had not submitted their returns, according to the results, and 75% are not ready to do so.

One of the issues is a general lack of knowledge about crypto-tax, with confusion over taxable activity, said Shehan Chandrasekera, CPA and head of tax strategy at CoinTracker.

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Indeed, most survey respondents failed to identify the tax consequences of many common transactions.

“We continually see the misconception that if you haven’t cashed in for [U.S.] dollars, you have nothing to declare,” said Matt Metras, an enrolled 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. Profit or loss is the difference between your purchase price, called the basis, and the sale or trade value.

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

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

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

Advice for last-minute filers

With cryptocurrency exchanges still not required to submit Form 1099-B, covering profits and losses from annual transactions, it can be difficult to calculate your tax bill, especially with a large volume of business. .

“My advice would be to take your time and do it right,” Metras said. If you need help, you probably won’t find a crypto tax professional before the deadline. However, filing an extension “buys you more time”, he added, to gather information and make an appointment.

Crypto-tax software can help reconcile transactions, but it may not be 100% accurate, Metras warned. “Be sure to examine the items that come out of it.”

If your capital losses exceed capital gains, up to $3,000 a year can be deducted to offset regular income, Chandrasekera said, and if the losses exceed $3,000, you can carry them back across years. coming.

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