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Cryptocurrency Taxes: What are they?

 
cryptocurrency taxes

Legalization of cryptocurrency entails not only advantages for cryptoinvestors, but also disadvantages. One of them is the cryptocurrency tax. But not so large amount of people understand what the taxes for cryptocurrency are, so they don’t register their money. Other users believe that the use of cryptocurrency is not legal enough, because they refuse to pay taxes.

Legalization of cryptocurrency entails not only advantages for cryptoinvestors, but also disadvantages. One of them is the cryptocurrency tax. But not so large amount of people understand what the taxes for cryptocurrency are, so they don’t register their money. Other users believe that the use of cryptocurrency is not legal enough, because they refuse to pay taxes.

There is no special procedure for calculating the tax base when selling cryptocurrency, therefore it is necessary to adhere to the general instructions of the Ministry of Finance: calculate your income as the difference between the income received and documented expenses. The ministry already now proposes using such a mechanism for calculating tax on cryptocurrency transactions. There may be a problem: the purchase of cryptocurrency is often not made out. Many do not think about any “pieces of paper”, and when the question arises about the legal registration of the sale of cryptocurrency, you have to pay tax on the entire amount of income received. In addition, until the official status of cryptocurrency is determined, it will not be possible to understand whether it will be possible to use any benefits or tax deductions.

Not long ago, #Metahash has been registered as a legal entity and except strong banking system, and high education rate, it also pays taxes. And we should say that the rate of them are rather low.

Typically, tax reporting practices for companies and individuals are associated with traditional fiat currencies, with the advent of bitcoin and other cryptocurrencies, more and more attention is paid to this area.

First of all, it should be noted that there is still very little clarity and a single approach to the issue of cryptocurrency taxation. Different countries interpret this question differently: for example, in Japan they are recognized as legal tender; in the United States, according to the official position of the Federal Tax Service (IRS), Bitcoin is considered property, but courts in different states periodically make decisions defining “digital gold” with money that is no different from Fiat; in the UK, cryptocurrency has the status of foreign currency and is considered private money.

All users should pay taxes for sales and trades

Every  transactions with the cryptocurrency, both income and loss, should be taxable. The users must report about all actions to the Internal Revenue Service, especially about exchange, transfer back, and spending cryptocurrency.

The IRS is increasingly paying attention to crypto taxes.

What happens if users do not pay cryptocurrency taxes? Of course, like any other crime, it is threatened with a fine or imprisonment.

From 2013 to 2015, only 900 people were taxable users of cryptocurrency. But in 2017 there was a trial, after which Coinbase should report on all investors who carried out transactions of more than 20 thousand dollars.

Types of the cryptocurrency taxation

As we can see in the IRS Guide on Virtual Currencies, cryptocurrency is not a currency, but property. Therefore, the tax that the user pays is called the capital gains tax.

And there are two such taxes: long-term and short-term. If, before any transactions and actions with your currency, you held it for more than a year and did not take any action with it, then this is a long-term tax, and if vice versa, it is a short-term tax.

Also, the cryptocurrency can be subject to income tax – this is when your salary in the form of cryptocurrency.

But remember that regardless of the currency in which you earn your income – in cryptocurrency or dollars, both employees and employers must report their income to the IRS.

Not everything related to cryptography is taxed.

If an investor buys or simply owns a cryptocurrency, and does not buy or trade, then he is not taxed. If investors lose their assets in trading, they can also claim to be economics on capital gains taxes.

Also, taxes may not be subject to tokens. After all, they are not considered a currency, but a service, therefore they are not subject to tax legislation.

But, of course, first you need to get advice from an accountant or a lawyer who understands cryptocurrency issues in order to have no problems with tax evasion in the future.

Paying or not paying taxes on cryptocurrencies is a decision that everyone ultimately makes for himself. Nevertheless, the examples and events described above say that I would like it or not, but the majority will have to answer this question sooner or later.

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Article written by Suresh

Suresh is author and owner of way2earning.com. He loves to help people by teaching the ways to make money online with advertising and affiliate programs. He is also passionate about technology and love to write reviews.

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