Cryptocurrency Capital Losses Can Be Reported to Reduce the Tax Bills – Willful and Non-Wilful Tax EvasionApril 15, 2019
The tax rules applicable to different cryptocurrencies differ by countries. Investors need to check with their local tax professional in order to assess their own tax situation.
Anyone who has incurred a taxable situation by being involved in the cryptocurrency market should report the cryptocurrency activity. A taxable situation is a sign of tax liability. Taxable events per the IRS 2014 guidance require cryptocurrency to fiat conversion to be a taxable event. Crypto to crypto trades is also considered to be taxable. The fair market value should be calculated for the USD. Transactions using cryptocurrency to pay for services and products is a taxable event.
Cryptocurrency gifts are not taxable for the donor; however, the recipient will be inheriting the cost basis. If the gift exemption amount is reached, the gift tax applies. Wallet to Wallet transfers is not taxable. Transfers can be made between exchanges or wallets without investors having to pay for capital gains and losses. Investors need to ensure that their transfers are not being marked as taxable events. Anyone who will be buying USD with cryptocurrency will not be taxed.
Those who have been trading on foreign exchanges like Binance should report these holdings. Those who do not report will be considered to have been involved in tax fraud. Cryptocurrency capital losses can be reported to reduce tax bills.
Those investors who had to sell their tokens to avoid further losses might in many cases have sold it for less than what they brought it for. So, the bear market technically reduces tax bills. Accurate tax documentation is not available in most exchanges. Identifying the cost basis is the real issue in many tax filings. Tax obligations need to be fulfilled per the norms imposed by the respective nations of the investors.
Tax obligations apply for tokens like Bitcoin that have made it to the main headlines and as well to smaller tokens like the TCAT tokens. It is not about whether the token had made it to the top or if it is just new in the market. Simply to say, every token based income is taxable, and investors need to account for it.
Non-compliance with taxation will put taxpayers to applicable civil and criminal penalties. Penalties will vary based on willful and non-wilful tax evasion. Those taxpayers who did hold the cryptocurrency like an investment will be taxed just like they would be on bonds and stocks at the capital gains rate.