Indiana and New Hampshire May Start Accepting Bitcoin For Tax Payments

Indiana and New Hampshire, two States in the U.S. have proposed a bill that will allow cryptocurrencies to be used for tax payments. The documents which were filed on January 24 and January 4 respectively, call for the adoption of virtual currencies in the area of taxation.

Indiana and New Hampshire May Join Ohio in Accepting Bitcoin

Indiana and New Hampshire may likely join Ohio to accept Bitcoin for tax payments. This is because a bill has been filed in either State and it requires the approval of the government for these digital assets to be used. In the case of Indiana, the current tax code will have to be amended in order to meet the proposed change.

Indiana’s House bill number 1683 was filed on January 24 and it states that one or more digital assets have to be selected to pay taxes. The asset will also be used for penalties, costs, special assessments, interests, among others. The document also says an exchange rate should be determined for the selected virtual asset(s).

New Hampshire’s Proposal for the Use of Virtual Assets for Taxes

New Hampshire’s House bill number 470-FN, on the other hand, was filed on January 4 and it seeks to allow “state agencies to accept cryptocurrencies for payments”. According to the document, the State Treasurer and other authorities involved, need to set up a framework that will allow virtual currencies to be used for tax and fee payments from July 1, 2020.

The bill also notes that the current policy in place is to return payments made in currencies other than the U.S. dollars to the payor. In addition, if the use of cryptocurrencies is approved, then their volatility could pose a problem. The document, therefore, proposes that tax payments received in Bitcoin should be converted to fiat in order to mitigate risk.

Potential for More U.S. States to Adopt Cryptocurrencies for Taxes

BTCNN on November 25 reported that Ohio, Texas is the first state in the U.S. to accept Bitcoin for taxes. The portal used to facilitate these transactions is ohiocrypto.com and Bitpay’s service has been employed. In January, Overstock announced that they will be the first company in Ohio to pay their taxes using the platform.

The approval of Bitcoin for tax payments in Ohio may have encouraged several other states to innovate. Reports also reveal that prior to the digital asset’s acceptance in the region, states like Georgia, Arizona, and Illinois and had made proposals. Unlike Ohio, the use of virtual assets never came to be.


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Author: Grace Joseph
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American Companies Can Now Settle Payroll Taxes In Cryptocurrency via Bitwage

International cryptocurrency payroll service provider Bitwage has announced that it has partnered with Texas-based Simply Efficient HR. The move will allow companies to pay W2 employee and payroll taxes in all 50 U.S. states, plus Puerto Rico, using BTC and ETH.

 

Bitwage and Simply Efficient Join Forces

With Bitwage’s solution now out of beta, American employees are able to choose any percentage of their wage to be in USD or cryptocurrency. To participate, a company needs to sign up to Bitwage, reach out to support for Payroll & HR services to receive personalized account management from the Simply Efficient HR team, and then add the account on Bitwage. Simply Efficient HR invoices companies through Bitwage for USD needed to fund payroll taxes and employee payrolls and the company accepts invoice and fund payrolls in BTC or ETH.

CEO of Bitwage Jonathan Chester commented: “As the leader in cryptocurrency payroll solutions, we are excited to continue to push the adoption of real use-cases within the industry. Together with Simplexity, we hope to close the financial loop within the cryptocurrency industry and continue to make bitcoin and other cryptocurrencies a part of everyday life.”

American Companies Can Now Settle Payroll Taxes In Cryptocurrency via Bitwage

Bridging the Gap to the Traditional Financial System

The partnership has been live in beta mode since November, with its first customer the peer-to-peer exchange Paxful. “Bitwage bridges the gap between bitcoin and the traditional finance system,” Hayel Abbassi, Paxful Controller, said. “As a company that earns 100% of revenue in bitcoin, we are always looking for service providers who will accept digital currency. Paxful has a significantly sized team in the states and we need to pay them as employees on payroll, not as contractors. Bitwage has recently formed a partnership with a traditional payroll company who integrates into their platform to provide these services. Paxful simply sends bitcoin to an address, and our employees receive net checks with the proper federal and state taxes withheld.”

American Companies Can Now Settle Payroll Taxes In Cryptocurrency via Bitwage
W2 Tax Form

According to the announcement, U.S. Bitwage clients are also able to pay for benefits such as health insurance, as well as HR compliance services. Companies around the world are able to use their crypto holdings to pay local vendors in the U.S., E.U., U.K., Brazil, Philippines, India, Mexico, Argentina and other regions.


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Author: Avi Mizrahi 
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Expect ‘Large increase’ in Cryptocurrency Taxes Filed for 2018, Says Bittax CEO

Why did you decide to launch Bittax? Are Bitcoin taxes too cumbersome to calculate for the average person? 

Gidi Bar Zakay: I’ll admit that, like everyone else, I was also prejudiced against bitcoin. But when I was approached by the tax authority while serving in a public position at the Institute of Certified Public Accountants and was asked to comment on a circular that they intended to issue regarding bitcoin, I realized it has potential. That this is what the world needs right now.

Not everyone can calculate crypto taxes from their own home. The regular and familiar calculation method – FIFO (First in First Out) – isn’t so simple to calculate either, but calculating tax in a way that will simultaneously represent the actual activity in coins, prevent double taxation caused by the exchange of altcoins, allow the user to present the whole image, prevent data omission and save tax payments on activity that does not reflect an actual transaction, is a complex task which cannot be performed with Excel or a simple calculator at home.

Is your service aimed at Israeli citizens only or is it global?

The service is currently active in Israel but will soon be exported to the USA and then to Europe.
Our company is currently only listed in Israel, but it is expected to operate internationally.

How does it work – how much is it? Is it simply a self-service calculator or do you have experts that can help clients directly? 

This is how the system works: the user copies their addresses into the system and receives a full overview of their activity.

The users indicate which transactions belong to them, which were forwarded to a third party and which are taking place at the exchange. If the users do not remember certain transactions, the system will make recommendations and attempt to help them remember.

If the users have reached a full overview, the system will warn them of the missing data. The system is unique because of its calculation method. The system does not use the regular and common methods but performs a specific identification of the coins sold and calculates the tax liability accordingly.

This method, patent pending, of which is in the process of being registered, reduces the tax liability by 70-25%, according to the type and scope of activity.

Of course, if the user requires assistance, we are available to guide and assist as much as possible.

What kind of approach does the Israeli government have on cryptocurrency taxes?


The Israeli tax authority treats cryptocurrency as assets and taxes the profits through the capital gains tax. This decision does not come as a surprise – many governments around the world made it, and it is somewhat understandable. Most people don’t use cryptocurrencies at coffee shops and grocery stores, but as instruments for investment and trade.

Once any person would be able to use bitcoin for daily purchases, I believe that most governments will acknowledge it is a tax-free coin.

How many people around the world do you estimate owe cryptocurrency taxes today? In other words, how big is your potential market? 

When examining the activity data from the different exchanges, we are looking at hundreds of millions worldwide.

How many of them currently pay taxes?

Very few. This process will take time, for both the users and the authorities.

Once the coin owners will understand that regulation will result in international adoption of the coins, and the governments will understand how to collect these taxes and how to proactively approach the users, this process will unfold naturally. I expect to see a large increase in the number of reports filed for 2018 in two or three months and an even greater increase in the reports for 2019.

Bitcoin Taxes

A poll in April 2018 revealed most people saying ‘you’ll never catch me’ when it comes to paying taxes on their crypto gains. Is this a problem for the tax agencies? Is it difficult for the gov’t to determine whether an individual owes taxes in this case? 

We’ve heard these statements from the global crypto community, and we can understand them. As a group, we believe in the ideology of a decentralized system and find it difficult to accept that someone else does not view crypto as a coin and demands taxes for it. But today, we can see that the authorities around the world receive the information.

The authorities approach some of the exchanges and demand to receive the data. Many countries grant them the power to do so. Some of the exchanges share the information following the authorities’ request, and once the data is in their hands, it is not difficult to reach the users.

Do you think the bear market of 2018 was partially due to the billions owed in taxes from the previous year resulting in ‘massive selling’ as Tom Lee suggested?

I think that the market’s decline is the positive outcome of people who tried to use crypto in order to make easy money without actual activity backing it, and then left when they realized that the celebration is over. I think that the market is in excellent condition. Those who stayed are the people who truly believe in the future of cryptocurrency and are genuinely interested in developing it.

Considering that 2018 was a downward year for cryptocurrency prices across the board, would filing taxes on crypto losses be particularly recommended this year?

If someone had a profitable activity at the beginning of 2018, through coins or other capital channels, it would be helpful for them to report their losses at the end of 2018. However, it will not be possible to offset losses incurred in 2018 against the huge profits gained in 2017.

What is the best jurisdiction to consider for people who’d like to pay little to no crypto taxes? 

The authority to which crypto-related taxes are paid is determined by the user’s tax residency. The tax residency is determined by, among other things, the number of days spent in the country during the relevant year.

Some countries are friendlier towards cryptocurrency, and I’ve heard of some that even treat crypto as a coin. But will a person leave everything and move to another country simply for tax considerations? Then they must have an abundance of crypto… I would love to meet that person. It’s possible that the entire world has been looking for their identity for the past few years.

What are your predictions for the upcoming year? Do you expect more and more people to start paying cryptocurrency taxes?

I believe that in 2019 we will be looking at a continued effort to closely supervise the crypto market by the authorities, accompanied by an increase in tax payments by the users. What matters now is making sure that the privacy of the tax-paying users will not be affected.

Therefore, we are working on a solution which will maintain the privacy of the users throughout their relationship with the tax authorities, and will only expose the necessary information, addresses and personal data not included.

This solution will be beneficial for both the tax authorities and coin owners around the world because it’ll be worthwhile for the users to report their earnings willingly and not wait for the authorities to locate them.


Source
Author: Allen Scott
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Venezuelan Government Decrees Crypto Operators to Pay Taxes in Cryptocurrency

On Monday, the Venezuelan government published the official gazette No. 6,420 dated December 28, which contains a decree No. 3,719 that points towards new tax payment rules for cryptocurrency users. Dinero publication stated that:

“The government of President Nicolás Maduro published a decree that will require taxpayers who carry out operations in foreign currencies or cryptocurrencies to pay their taxes in that same currency and not in bolivars.”

The decree also stated:

“the Venezuelan people are currently facing a fierce war waged by internal and external factors that pursue the deterioration of the economy, which is why it is necessary to adopt sufficient measures to ensure the strengthening of the current fiscal regime.”

The Ministry of Popular Power of Economy and Finance is in charge of the execution of the decree which is in effect, at the time of press.

The Article one of the decree notes that taxpayers in Venezuela who carry out operations in cryptocurrencies or any foreign currency authorized by the law must “determine and pay [their tax] obligations in a foreign currency or cryptocurrency”.

The decree enlists two exemptions; transactions of securities traded on a stock exchange and the export of goods and services carried out by public bodies or entities. The decree also mentioned that the tax refunds for cases established in the decree will be made in the national currency and not otherwise.

Maracaibo Municipality in Zulia state clarified that it will use the national cryptocurrency, the petro for the calculation of business tax, reported the publication. There was confusion amongst the residents as they thought it meant for non-cryptocurrency users to also pay their taxes in petro.

The intendant of Servicio Desconcentrado de Administración Tributaria [Sedemat], Jean Carlos Martínez clarified to Noticia al Dia publication, a local publication that “taxpayers will not be charged taxes in petros.” He further added:

“We are using the value of the petro as a reference unit to be able to determine the minimum tax since the ordinance of the current economic unit is still stipulated in percentages of gross income.”

He also clarified that the national cryptocurrency, petro has two values, one as a cryptocurrency and the other as a unit of account that translates into 9,000 sovereign bolivars, which will be used in passport procedures or current salaries.

The decree also mentions that the payment of taxes will be carried out depending on the economic activity of each company or microenterprise. Martinez was quoted in the publication saying:

“If someone had transactions in petro, bitcoin or other currency, [they] should declare [their income] according to the currency that [they] manage.”


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Author: Namrata Shukla
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Pro-Bitcoin Ron Paul: It’s Time to Abolish Federal Reserve, Embrace Tax-Free Crypto

Retired US Congressman Ron Paul — a bitcoin skeptic turned proponent — reiterated his calls to abolish the Federal Reserve shortly after it raised the baseline interest rate a quarter of a percentage point, to a range of 2.25% to 2.5%.

This is the fourth time that the Fed — the central banking system of the United States — raised interest rates in 2018. The move sparked renewed fears of a US recession that could potentially trigger a global recession in 2019.

Ron Paul said the Federal Reserve should let the free market dictate interest rates instead of artificially manipulating them.

Paul: ‘The Fed Distorts the Economy’

“The Fed has NO IDEA what rates should be,” Paul tweeted. “The Fed manipulates prices, distorts the economy, and makes decisions by looking at the ‘data’ of a distorted economy.”

Central planning produces a world of economic delusions. America needs to get back to reality. End The Fed!

This is not the first time that Ron Paul — the father of current US Senator Rand Paul — has called to abolish the Federal Reserve.

As CCN reported in October 2018, Ron Paul trashed the Fed for manipulating interest rates, saying such artificial machinations could actually cause a recession. This, in turn, could bring about the death of fiat currency, he said.

“It is likely that the next Fed-created recession will come sooner rather than later,” Paul said. “This could be the major catastrophe that leads to the end of fiat currency.”

Paul said the only way to avoid a Fed-created recession is to let people use alternative currencies like bitcoin and to exempt cryptocurrencies from taxes.

Paul said central banks constantly increase and decrease the money supply to control the economy by manipulating interest rates.

He said the Federal Reserve‘s cyclical manipulation of interest rates creates an artificial cycle of economic booms and busts.

This can create an illusion of prosperity. Eventually, reality catches up to the Federal Reserve-created fantasies.

When that happens, there is a recession or worse, leading the Fed to start the whole boom-and-bust cycle over again.

Like many in the crypto community, Ron Paul is a libertarian who opposes government intervention in the free market. The virtual currency community generally prefers the crypto ecosystem’s decentralized and unregulated market.

Paul said an economy that is not manipulated is better for society. “Not only should we audit the Federal Reserve, we should get rid of it!” he said.

Former Crypto Skeptic Now Embraces Bitcoin

Until very recently, Ron Paul was a staunch advocate of the gold standard who was critical of bitcoin, as CCN reported.

“Bitcoin is very exciting…but [bitcoin investors] don’t have a long-term perspective,” Paul said in December 2017. “What’s it going to be like in 10 years? Nobody knows. But we have a pretty good idea of where gold will be, in a general sense.”

Paul has since changed his outlook on crypto, and now says he believes that bitcoin and a gold-backed currency can co-exist in a free society.


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Author: Samantha Chang
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Ohio Becomes The First State To Allow Taxpayers To Pay Tax Bills Using Cryptocurrency

By now, most taxpayers understand that there are tax consequences associated with cryptocurrency, but ironically, until recently you couldn’t pay those taxes using cryptocurrency. That’s about to change: With the launch of OhioCrypto.com, Ohio will become the first state in the nation to accept tax payments using cryptocurrency.

 

“We are proud to make Ohio the first state in the nation to accept tax payments via cryptocurrency,” said Ohio Treasurer Josh Mandel. “We’re doing this to provide Ohioans more options and ease in paying their taxes and also to project Ohio’s leadership in embracing blockchain technology.”

Under the new payment system, not all taxpayers can make payment in cryptocurrency: It’s limited to businesses operating in Ohio. Offering the service to individual taxpayers is on the agenda, but Mandel hasn’t indicated any specific timeframe for the expansion.

Here’s how it works: If you operate a business in the State of Ohio and you have a tax bill, you can register online at OhioCrypto.com to pay your taxes. You can make payments on any of 23 eligible business-related taxes (you can find a list here), and there is no transaction limit.

The Treasurer’s office isn’t holding, mining or investing in cryptocurrency for payments or processing. All cryptocurrency payments are processed by a third-party cryptocurrency payment processor, BitPay. Those payments are immediately converted to dollars before being deposited into a state account.

“The State of Ohio is the first major government entity offering its citizens the option to pay with cryptocurrency,” said Stephen Pair, cofounder and CEO of BitPay. “With BitPay, Ohio can leverage blockchain technology and benefit from reduced risk and identity fraud as well as enabling quick and easy payments from any device anywhere in the world and get paid in dollars. This vision is at the forefront of moving blockchain payments into mainstream adoption.”

You’ll need to use Payment Protocol-compatible wallets to pay. Those include BitPay Wallet; Copay Wallet; BTC.com Wallet; Mycelium Wallet; Edge Wallet (formerly Airbitz); Electrum Wallet; Bitcoin Core Wallet; Bitcoin.com Wallet; BRD Wallet (breadwallet); and Bitcoin Cash (BCH) Wallets. If you don’t have one of these wallets, OhioCrypto.com advises you to create one and send some coin to it.

Currently, the Treasurer’s office only accepts Bitcoin for payment, but the plan is to add other cryptocurrencies in the future.

There is a cost associated with paying in cryptocurrency (it’s worth noting taxpayers who pay via credit cards or debit cards are also subject to fees from payment providers but are not assessed fees through the Treasurer’s office). Taxpayers paying using cryptocurrency are charged a transaction fee, network fee and miner fee. The miner fee will be displayed in the taxpayer’s wallet and not on OhioCrypto.com. The transaction fee will be 0% during an initial three-month introductory period, and after that time, it will be 1%. Fees are user fees and are not supplemented by state funds. According to the Treasurer’s Office, “The State of Ohio will not pay Bitpay or any other company fees for processing or other services relating to the acceptance of crypto.”

It will be interesting to see if other state governments follow suit. A bill to accept bitcoin as payment for taxes was ultimately voted down, 264 to 74, by the New Hampshire legislature in 2016. A similar measure in Utah also failed to pass, while a bill to accept crypto for payments in Georgia stalled earlier this year. However, states are still trying: Arizona’s state legislature actually passed a crypto payment measure, but it was vetoed on May 16, 2018.

The Internal Revenue Service (IRS) doesn’t currently accept cryptocurrency as payment either. By law, the IRS issues Regulations (interpretations of the tax code) and other guidance about the kinds of payment which can be used to pay taxes. The IRS has authorized payment by check, money order, credit card and debit card—but not by Bitcoin or other cryptocurrency.


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Author: Kelly Phillips Erb
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Taxes and Crypto

Bitcoin is “the grandfather” of cryptocurrency, as well as the first official application of blockchain technology. Given this, it is an inherently disruptive technology. Just as blockchain technology has disrupted traditional ledger technologies, Bitcoin has made waves in the fintech and currency spaces by successfully sustaining a decentralized, yet secure digital currency solution.

Bitcoin does not need centralized institutions—like banks—to be its backbone. Instead, a cryptographic encryption system acts as the mathematical authority required to organize and verify transactions. Bitcoin miners task their PCs with solving pieces of an open-source algorithm, which helps to organize and verify transactions. In return for their hard work, this mathematical authority compensates miners in Bitcoin in proportion to their efforts.

Miners can then exchange Bitcoin for fiat money like USD, or use them to buy goods and services directly.

Bitcoin and the US government have an interesting relationship. Between Bitcoin’s trademark volatility, and its superficial associations with the nefarious, not to mention the anxieties officials must have about ceding monetary control and fiscal policy to what is essentially an algorithm and those that verify the transactions (if it would ever come to that), it makes sense that the government would be uneasy about mainstream acceptance of the currency.

However, over time, Bitcoin’s resilience as a network and a currency, as well as the expediency and cost-effectiveness of blockchain payments have made a case for the cryptocurrency that has proved quite effective. Accordingly, officials have tolerated a gradual yet substantial induction of Bitcoin into conventional financial services.

First, cryptocurrency exchanges started pairing Bitcoin to fiat counter-currencies such as the dollar. These platforms, like Binance and even Coinbase remain popular today. The increasing presence of Bitcoin in finance is also evidenced in Bitcoin futures contracts, which are traded on major institutional exchanges like the Chicago Mercantile Exchange and the Chicago Board Options Exchange.

Given this acceptance, and Bitcoin’s gradual inroads into the established market, it only makes sense that Bitcoin has become subject to some institutional pressures. And indeed, regulators watching over this latest entry to their ecosystem have also exerted their own influence on Bitcoin.

Bitcoin and Taxes

While originally proclaimed anonymous, the lion’s share of Bitcoin transactions today are transparent. Governments have observed surges of black-market trading using Bitcoin in the past. Exchanges now impose anti-money laundering requirements on Bitcoin traders to avoid drawing the ire of regulators.

The biggest change for Bitcoin traders, though, has been taxes.

While regulators, central bankers, and federal judges all have different opinions on how to categorize Bitcoin, whether a currency or commodity, they all seem to agree it should be taxed. Most major countries tax cryptocurrencies similarly, too.

So, what does that mean for traders?

The Specifics

The first thing to know is that nothing matters until it’s put into law. There’s always speculation about what will happen based on what some financial regulator says, but no individual has the ability to redefine an asset or unilaterally alter tax code, and little has changed since the IRS first addressed cryptocurrencies in 2014.

In the United States, IRS Notice 2014-21 defines virtual currencies as property. This means anything purchased using a digital currency is liable to be taxed as a capital gain whether short or long term depending on how long the asset was held.

For instance, if you buy a cup of coffee using Bitcoin that you purchased when it was worth $1,000, you must also account for the price of Bitcoin at the time of the coffee purchase. If Bitcoin is trading at $1,200 when you buy the coffee, you’ve purchased a dollar-denominated good with another asset that is now worth more in dollars than it used to be. That means the amount of Bitcoin you spent on the coffee will be taxed according to capital gains rules.

While cryptocurrency brokers aren’t required to issue 1099 forms to clients, traders are supposed to disclose everything to the IRS or face tax evasion charges. Taxable transactions include:

  • Exchanging cryptocurrency for fiat money, or “cashing out”

  • Paying for goods or services, such as using Bitcoin to buy a cup of coffee

  • Exchanging one cryptocurrency for another cryptocurrency

  • Receiving mined or forked cryptocurrencies

The following are not taxable events according to the IRS:

  • Buying cryptocurrency with fiat money

  • Donating cryptocurrency to a tax-exempt non-profit or charity

  • Making a gift of cryptocurrency to a third party

  • Transferring cryptocurrency between wallets

How to Determine What You Owe

Determining how much profit you’ve made and how much you’re liable for in taxes is a bit complicated.

Cashing Out of Crypto

In keeping with standard tax rules, when cashing out cryptocurrency for fiat money like dollars, one will need to know the basis price of the Bitcoin they’re selling.

For example, if you bought Bitcoin at $6,000 and sold it at $8,000 three months later, you’ll pay a short-term capital gains tax (equivalent to one’s income tax) on the $2,000 gained. If the same trade took place over a two-year timeline, long-term capital gains taxes correspondneymar to one’s tax bracket are applied. This is 0% for those in the 10-15% income bracket, 15% for those in the 25-35% income bracket, and 20% for those in higher brackets.

Selling the cryptocurrencies that one has mined instead of those that they bought previously with fiat is a different story. Since they’re receiving dollars in exchange for mining inputs that can only be described as work (and indeed is so with the term “Proof of Work”), the profit made from selling mined cryptocurrencies is taxed as business income. One is also able to deduct the expenses that went into their mining operation, such as PC hardware and electricity.

Personal Purchases

The taxes on buying a cup of coffee with cryptocurrency are also convoluted. One must know the basis price of the Bitcoin they used to buy the coffee, then subtract it by the cost of the coffee.

Currently, tax code allows taxpayers to exclude up to $200 per transaction for foreign currency exchange rate gain, if the gain was derived from a personal purchase, like a cup of coffee. This is known as a de minimis election. But there is no “de minimis” clause that exempts small transactions, which can create a very tangled tax problem if one is constantly trading crypto and also using it to buy goods and services.

Determining which coins were used to buy the coffee, their basis price and according gains, and then repeating this for every purchase only gets more complicated if the buyer is also trading coins frequently. It’s therefore vital to remember to keep all transaction information for each digital wallet and currency.

Another complication comes with the fact that this only works with gains. Declaring a loss and getting a tax deduction is relevant only for capital asset trades or for-profit transactions. If one buys Bitcoin at $8,000 and then uses it to purchase a pair of jeans when Bitcoin is worth $6,000, they can’t declare this a loss on their tax forms.

Exchanging Cryptocurrencies

Exchanging cryptocurrencies exposes investors to taxes as well. You’re effectively selling Bitcoin if you buy Ethereum with it, so you’ll need to report the difference in Bitcoin’s price between when you bought it and when you spent it on Ethereum, plus make note of the price of Ethereum at its purchase time for when you sell it later.

Many exchanges help crypto traders keep all this information organized by offering free exports of all trading data, which an accountant (or a diligent enthusiast) can use to determine their tax burden. Blockchain solutions are also well-suited to record this data and highlight relevant points of tax interest. Platforms like TrustVerse have smart-contract based wealth management services that organize one’s digital identity and their assets on the blockchain, to ensure that tax and estate obligations are addressed with immutable accuracy according to the asset owner.

It is always recommended to go to a certified accountant when attempting to file cryptocurrency taxes for the first time. While it might seem daunting to tackle a multi-year trading career, it must be done, and it’s getting easier as CPAs and other tax professionals learn more about crypto assets. For now, the IRS is letting people become accustomed to the new way of doing things and has published a guide on amending old tax returns to include cryptocurrency. Savvy traders are already ahead of their obligations and are now focusing on the next year’s crypto market without this cloud of uncertainty over their heads.


Source
Author:  Joe Liebkind 
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You Don’t Have to Own Crypto to Make Money Off of It

To make his fortune on cryptocurrency, Jake Benson doesn’t have to choose a winner among the hundreds of firms hawking digital tokens. He just needs to do their taxes.

Benson is following the ’49er model — as in 1849. Like industrious shopkeepers during the California Gold Rush, he’s offering the digital equivalent of picks and shovels. In his case, accounting services.

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The world of digital currency is poised to draw billions of dollars from institutional investors if it can provide boring back-office services like custody banking and trading systems along with tax accounting. While the functions are essentially the same as in traditional businesses, crypto presents unique challenges.

“Just to name one difference, the number of decimal places in a crypto asset can be up to 18-plus digits,” said Benson, whose Libra back-office firm caters exclusively to the crypto crowd. “That fact alone actually breaks a lot of accounting systems.”

Hundreds of firms like Benson’s are competing to sell the nuts and bolts of the burgeoning market. Startups financed by venture capital and token sales are fighting for advantage as the field begins to get crowded. Like the sellers of mining implements during the Gold Rush, they plan to profit whether or not Bitcoin and other cryptocurrencies turn out to be digital treasure.

Traditional Solutions

“What really excites me is this whole picks-and-shovels approach,” said David Wills, chief operating officer of Caspian, a Hong Kong-based provider of crypto trading systems and related technologies for hedge funds. “As long as the asset class has a pulse, those companies will be the ones to succeed.”

If established firms such as State Street Inc. and Bank of New York Mellon Corp. decide to do business with the virtual-currency world, it would lend credibility to the industry even if the firms aren’t that knowledgeable about crypto, said Morgan Hill, a partner at the $30 million Turing Funds in New York.

“There are no off-the-shelf solutions from traditional finance,” Hill said. “Everything is still getting pieced together. The expertise in this space are people who got in early and have learned the pitfalls.”

At a trio of crypto conferences in New York last month, hundreds of companies clamored for one of two things, Hill said: investors in their initial coin offerings or customers for their back-office businesses.

Almost all the companies are startups, and most have yet to create what Hill calls an “MVP” — a minimum viable product. A few, like Libra, Benson’s firm, have been around a few years and are adding clients and staff as demand surges. The trick is to get customers to stay, said Caspian’s Wills.

Creatures of Habit

“Human beings are creatures of habit,” Wills said. “Once a trading system is built into your operational workflow, it’s hard to remove it. In crypto, there are many different levels of workflow that need to be in place.”

Wills said Caspian is planning to sell a so-called utility token that can be used to pay trading fees. It will also be used to compensate developers of applications available through Caspian’s system.

Since money managers are required to keep customer assets secure, a pressing need is a custodial bank. Custody banks such as BNY Mellon and State Street would fit the bill, but they haven’t committed to crypto.

Job Opening

That leaves the job open for digital-money companies. Omega One, an agency brokerage for cryptocurrencies that’s opening an office in Bermuda, says it will work with insurers and the island’s government to set up a custody business there.

“Bermuda has an incredibly strong legal, technical, reputational jurisdiction for financial services in general, but particularly for custody of assets and reinsurance,” said Alex Gordon-Brander, Omega One’s chief executive officer.

Today’s crypto scene looks a lot like the birth of the dot-com boom in the mid-1990s, Gordon-Brander said.

“Obviously, not everybody survives the cut,” he said. “But it’s clear that the revolution is happening and the leaders are emerging.”



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Author: Rob Urban
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Crypto Exchange Bithumb Hit With Bill After Tax Investigation Ends

South Korean cryptocurrency exchange Bithumb has been found not guilty of tax evasion, but now faces a massive tax bill, according to reports.

The country’s National Tax Service launched an investigation into the firm back in January amid a wider crackdown on crypto exchanges, and has now cleared the company of wrongdoing. However, Bithumb – one of South Korea’s biggest exchanges by trading volume – now faces a bill for back taxes that totals around 30 billion won (almost $28 million), according to local news source eToday.

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A tax official was quoted as saying:

“The [National Tax Service] has conducted a tax investigation against Bithumb for the 2014 to 2017 business years. I know that Bithumb has decided to pay the related taxes without any objection to the imposed tax amount.”

“No charge of tax evasion was found, so prosecution charges against tax portal were not carried out,” the official continued.

The exchange has reportedly said it is yet to receive a formal notice about the final tax liability.

The South Korean authorities have been intensifying their actions against the country’s crypto exchanges since late last year, moves that followed a ban on initial coin offerings (ICOs) in September.

The country outlawed anonymous trading in January, and has moved to investigate a number of exchanges over possible crimes such as embezzlement and fraud. Most recently, a local police department said that executives at the Coinone exchange will be charged on grounds that its margin trading service is, in effect, illegal gambling.

While it briefly seemed that a ban on exchange-based trading might also be in the works, that possibility seems to have diminished, alongside regulatory moves to once more allow domestic ICOs under stricter rules.



Here at Dollar Destruction, we endeavor to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!
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Author: Daniel Palmer
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Spending Crypto For Personal Use Can Be A Tax Mistake

The AICPA recently asked the IRS for some equitable relief by adopting a “de minimus election,” which provides a $200 threshold for excluding capital gains income on personal transactions.

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If a taxpayer purchases virtual currency (cryptocurrency) and spends it on personal use, the IRS requires him to calculate a capital gain or loss on each transaction. Capital gains on personal-use property are reportable and subject to tax, whereas, the IRS disallows capital losses.

The AICPA recently asked the IRS for some equitable relief by adopting a “de minimus election,” which provides a $200 threshold for excluding capital gains income on personal transactions.(See the AICPA letter and an excerpt of the de minimus rule proposal below.)

If a taxpayer acquires virtual currency as an investment, though, then all capital gains and capital losses are reportable, and the de minims rule should not apply.

The AICPA suggests the IRS apply a similar de minimus rule used for foreign currency transactions in Section 988(e)(2) (see below). The code section refers to personal purchases, not Section 162 business or Section 212 investment property. For example, if a taxpayer acquired Euros for a European vacation, the de minimus rule applies, and the taxpayer can exclude capital gains on the Euros spent if the capital gain is under $200 per transaction.

The IRS does not permit taxpayers to deduct capital losses on personal-use property, including foreign currency or virtual currency held for personal use. Taxpayers may not deduct capital losses on the sale of a private auto or a primary residence.

Examples of using crypto for personal use vs. investment property

1.    Joe purchased one Bitcoin in early 2017 for personal-use spending, and his Bitcoin rose in price substantially during the year. Joe planned on many vendors adopting Bitcoin as a means of payment. Joe’s original intention was for personal use, so a de minimus exemption should apply to him if the IRS approves that AICPA recommendation*. If Joe bought Bitcoin in 2018, he might have a capital loss, which would be non-deductible on personal-use property.

2.    Nancy invested in 10 Bitcoins in early 2017, and her intention was capital appreciation and diversification into a new asset class. She spent Bitcoin frequently during the year on personal transactions, buying goods and services wherever Bitcoin was accepted. She hoped it would be tax-free, but it’s not.

The intention of the taxpayer is critical in determining tax treatment. If the aim is for personal use, then the de minimus rule should apply to capital gains under $200, and capital losses are not deductible. If the intention is for investment, then it’s capital gains and losses. If the purpose is for business, ordinary gain or loss treatment applies.

With tax treatment hinging on category (personal use, investment, and business), it’s wise to segregate cryptocurrency into these buckets carefully. If the IRS agrees with the AICPA proposal on the de minimus exemption, declare a crypto wallet for personal use, and the rest as an investment to protect capital loss treatment on the bulk of your crypto that you don’t plan to spend.

Excerpt from the AICPA letter

4. Need for a De Minimis Election

“Overview: Some taxpayers may only have a minimal amount of virtual currency that is designated for making small purchases (such as buying coffee). Tracking the basis and FMV of the virtual currency for each of these small purchases is time consuming, burdensome, and will yield a de minimis amount of gain or loss. A binding election applicable for a specified amount of virtual currency is beneficial to taxpayers.

Currently, section 988(e)(2) allows for an exclusion of up to $200 per transaction for foreign currency exchange rate gain, if derived from personal purchase. The same exclusion should apply to virtual currencies even though they are considered property rather than foreign currency.

Suggested FAQ

Q-9: May individuals use a de minimis rule for virtual currency similar to the section 988(e)(2) exclusion of up to $200 per transaction for foreign currency exchange rate gain?

A-9: Yes. Individuals may use a de minimis rule, similar to section the 988(e)(2) exclusion, for virtual currency transactions to alleviate the burden or recordkeeping for individuals who use virtual currency as a medium of exchange. This de minimis rule allows taxpayers to exclude transactions resulting in $200 or less of gain.”

Section 988(e)(2) Exclusion for certain personal transactions

“If—

(A) nonfunctional currency is disposed of by an individual in any transaction, and

(B) such transaction is a personal transaction,

no gain shall be recognized for purposes of this subtitle by reason of changes in exchange rates after such currency was acquired by such individual and before such disposition. The preceding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200.

(3) Personal transactions. For purposes of this subsection, the term “personal transaction” means any transaction entered into by an individual, except that such term shall not include any transaction to the extent that expenses properly allocable to such transaction meet the requirements of—

(A) section 162 (other than traveling expenses described in subsection (a)(2) thereof), or

(B) section 212 (other than that part of section 212 dealing with expenses incurred in connection with taxes).”

(Note: Section 162 is for business, and Section 212 is for investments.)

* The IRS has made no indication that they intend to adopt all, or any, of the many excellent recommendations from the AICPA. 



Here at Dollar Destruction, we endeavor to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!
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Author: Robert Green
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