A number of services have risen to provide taxpayers the necessary software to calcuate their digital assets gains and losses. Generally these services assist a taxpayer in completing the form 8949 which you are familiar with. This form is either printed or digitally delivered to the tax professional who uses the data to complete the Schedule D and other necessary documents. There can be complex interactions between the traditional assets in the portfolio if you have brokerage accounts as well. Losses in traditional asset classes can offset gains in the digital asset space. Loss harvesting is an important technique.
However, the services that exist require the taxpayer to connect each wallet individually and testify that it is their property. There is clearly going to become issues with this. As every person in the world on-boards into digital assets there will be a need for a robust digital identity solution, the uses for taxation are obvious. What other important use cases could be accelerated by a robust digital identity solution?
Is there a time limit on when you have to claim your earnings? I ask because I have not been in the space long.
Not sure If I understand the Question. Earnings should be reported in the tax year they are earned. Claimed sounds like something else.
I probably should go through the course that is available first. I was starting to file my taxes last night and wasn’t sure if I could claim the small amount of crypto the following year. Im sure there would be a penalty.
The IRS is good at calculating penalties.
Hi , if you are below income do you still have to report your crypto currency? Are losses considered a tax write off? Like in the stock market?
Losses can be a tax deduction and you can carry over losses to years when you will make money in crypto. It is a good practice to file.
Hello sir,
What do you mean when you say that there will be some issues that arise when connecting each wallet individually and testify that it is your wallet with tax services?
Do you mean like identity theft? If so, which services are highly recommended in terms of safety?
Thanks
Good question. Yes, identify theft is one issue. Divorced couples claiming same wallet, unclaimed wallets, and more. I use zenledger for my clients. Lukka tax is reliable, among others. I think most commercially available services are ok, but some scammerswill spoof sites to steal customers data. So maybe data theft more than identify theft.