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Bitcoin investors enjoy substantial opportunities for fast and splashy returns. However, such a lucrative, disruptive enterprise does not come without tax consequences. As the laws and relevant tax code are modified to account for virtual currency assets and crypto employment payment structures, we can help you make sense of the requirements that you may face and their implications on your tax liability.
Depending on how you acquire and dispose of your Bitcoin, you might need to report it as a capital asset, taxable income, or both. Remaining compliant with tax code in relation to cryptocurrencies requires proper identification, classification, and declaration of all holdings. Failure to do so may result in audits or severe penalties that may only be avoided in some situations by engaging in voluntary disclosure.
To ensure that the Bitcoin you have rightfully earned remains in your pocket, you deserve the assistance of the professionals. The Carlsbad virtual currency Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing have the knowledge and resources to ensure that you and your crypto assets are protected. Call us to hear more at (800) 681-1295.
Bitcoin as Taxable Income in Carlsbad
As Bitcoin and other cryptocurrencies become more popular, their uses in daily life will begin to increase. You may even be offered a job or contract that pays in Bitcoin. However, such transactions may complicate your tax matters, so you should be aware of the ramifications that working for Bitcoin or other virtual currencies may have when it comes time to file your taxes.
The Bitcoin that you earn may be considered taxable income in any of the following circumstances:
- You obtained the Bitcoin through a mining enterprise
- You were paid in Bitcoin as part of your employment
- You worked as an independent contractor in exchange for payment in Bitcoin
- Your business offers goods or services in exchange for payment in Bitcoin
Even if your employer does not issue a W-2 or 1099, your income is always subject to income tax. The difficult part here is determining if the cryptocurrency that you receive will be considered income for the purposes of income tax. If you are unsure whether you will need to pay income tax on Bitcoin that you earned, speak to a qualified virtual currency tax attorney and CPA well in advance of any filing deadlines.
Bitcoin as a Capital Asset in Carlsbad
Taxpayers who buy, sell, and hold Bitcoin and other virtual currencies for the purposes of investment are responsible for declaring their gains and losses on the value of that property. Yes, Bitcoin is property, even if it is not tangible. When the market value of Bitcoin increases or decreases, the Bitcoin that the taxpayer holds also appreciates or depreciates.
The change in value will be recognized for tax purposes at the time of the transfer of the asset. In other words, between the time that you buy Bitcoin and the time that you sell it, the market may fluctuate dramatically, but the only relevant figure is the difference between the value at the time of purchase and the value at the time of sale. If you have taken a loss on your Bitcoin asset from purchase to sale, you may claim that loss in your tax filings the same way as you might any other investment.
Taxpayers report capital gains and losses on Schedule D of the tax return. More specifically, information about capital gains or losses through Bitcoin and other cryptocurrency assets should be included on line 13 of the tax return.
In order to avoid making false statements about capital gains or losses on Bitcoin and other virtual currencies, we strongly recommend that investors keep careful records of the crypto values at the exact times of purchases and sales, as well as the method or platform through which the transaction was facilitated. The Carlsbad Bitcoin CPAs at the Tax Law Offices of David W. Klasing can provide the best options for your situation and ensure that your records are organized and easily accessible.
Voluntary Disclosure of Bitcoin and Virtual Currency Tax Information in Carlsbad
Virtual currencies like Bitcoin are new on the scene and disrupting the very financial systems that the government’s regulations are built around. The tax system is not meant to address the issues that Bitcoin has created. Therefore, taxpayers are bound to make mistakes on their filings when it comes to vague areas such as cryptocurrencies.
If you feel that your past tax reporting may have fallen out of compliance on the subject of Bitcoin or other virtual currency that you received as income or held as a capital asset, you can take action today to protect yourself instead of just hiding in wait of IRS auditors.
The voluntary disclosure program can be helpful for any taxpayer hoping to limit the damage of a tax code violation. Engaging in voluntary disclosure requires the taxpayer to turn over correct or amended information on previous tax filings that may have not been correct or complete initially. However, the voluntary disclosure program can be hazardous in certain situations. You should speak to a Carlsbad virtual currency tax attorney and CPA in order to determine whether a voluntary disclosure would help you avoid the penalties associated with tax code noncompliance violations.
We Can Protect Your Virtual Assets Like Bitcoin in Carlsbad
The dual-licensed Carlsbad Bitcoin tax attorneys and CPAs at the Tax Law Offices of David W. Klasing stay on top of the latest developments in crypto tax code for you so that you never need to worry. Hear more about our services by calling (800) 681-1295 today.
