Can you tax cryptocurrency? Let’s find out!

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Can you tax cryptocurrency? Let’s find out!

Cryptocurrency technology shook up the economic world when BitCoin burst into the scene a couple of months ago. If you aren’t in the loop, you might want to consider checking it all out – starting here! Recently our CEO, Vinnie Fisher, had the privilege to be apart of The Future of Money Summit presented by Totally Crypto, where he talked about cryptocurrency and how is it impacting individual and businesses with respect to taxes.

We encourage you to check out the whole presentation below, but we’ve highlighted a few key points for you below as well.

crypto tax talk with vinnie fisher

 

 

Advantages

bitcoin accounting

Cryptocurrency has many advantages and solves a lot of the problems which are in relation to the centralized nature of assets/currencies:

  • No fraud
  • No identity theft
  • Immediate settlement
  • Access to everyone
  • Lower fees

What’s Taxable vs. What Isn’t

tax faq

Remember: as a US citizen you are required to pay taxes, and cryptocurrency is no exception. Currently, the IRS is treating this as property (like stocks or bonds) and because of this, it is being treated like the taxation of property. So, what’s taxable and what isn’t?

Taxable

  • Trading cryptocurrency to a fiat currency.
  • Trading cryptocurrency to cryptocurrency.
  • Using cryptocurrency for goods and services.
  • Selling, trading, or using forked coins or coins you mined.

Not Taxable

  • Buying cryptocurrency with USD.
  • A wallet-to-wallet transfer (Ex: Bitcoin is sent from one Bitcoin wallet to another).
  • Giving cryptocurrency as a small gift.

 

Treat Cryptocurrency as a Business

cryptocurrency tax accounting

Do your business as an entity. Under the new law, pass-through entities – such as partnerships, S corporations, LLCs, and sole proprietors – can claim a 20% deduction on earnings, subject to special rules restrictions.

Here’s where it gets exciting, there is a way to NOT pay taxes on cryptocurrency. If an owner wants income but does not want to pay capital gains taxes, he can set up the installment contract to pay interest-only payments from the reinvested sales proceeds. According to IRC section 453, this strategy can defer the capital gains tax indefinitely.

 

Want to learn how to make a comprehensive tax plan? Let one of our tax experts help you out with that! 

 

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Vinnie Fisher

Author at Fully Accountable | 1-877-330-9401 | www.fullyaccountable.com

Vinnie fisher is an entrepreneur, author, husband, and father of 4. A lawyer by trade, for almost ten years, Vinnie focused on tax planning, corporate formation and operation of closely held businesses. Vinnie was a principal partner in his law firm that he wound down to pursue a career as an entrepreneur. After the creation of a series of successful internet and e-commerce companies, he discovered a much needed service for business owners. In 2014, Vinnie opened Fully Accountable, an outsourced accounting and finance firm for e-commerce and digital businesses. Today he serves as the CEO of the company. Fully Accountable a cutting edge firm that offers done for you services that includes everything from master bookkeeping to fractional CFO services. We are digital experts specializing in high transaction businesses. Our clients are all over North America. We offer a complete accounting back office for your business costing less than the price of an entry level person in your company. Our data analysts and accountants do the work and provide the proactive, forward thinking feedback you need to make the right decisions to increase your growth and double your profit margin.