{"id":569,"date":"2018-06-03T13:49:45","date_gmt":"2018-06-03T17:49:45","guid":{"rendered":"https:\/\/www.amp.legal\/blog\/?p=569"},"modified":"2018-06-13T09:07:56","modified_gmt":"2018-06-13T13:07:56","slug":"crypto-tax-planning-basics","status":"publish","type":"post","link":"https:\/\/www.amp.legal\/blog\/crypto-tax-planning-basics\/","title":{"rendered":"Cryptocurrency Tax Planning Basics"},"content":{"rendered":"<p>While some investors see quick gains selling cryptocurrency, they must comply with the tedious task of tracking their profits.\u00a0For tax purposes, the <a href=\"https:\/\/www.irs.gov\/newsroom\/irs-reminds-taxpayers-to-report-virtual-currency-transactions\" target=\"_blank\" rel=\"noopener noreferrer\">IRS<\/a> treats virtual currency as property. The IRS considers cryptocurrencies to be capital assets that are subject to the capital gains rule. <a href=\"https:\/\/www.irs.gov\/pub\/irs-drop\/n-14-21.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Notice 2014-21<\/a> explains that principles applicable to property transactions also apply to virtual currency transactions.<\/p>\n<p>Investors\u00a0who fail to report virtual currency transactions may face audits, penalties, and interest. In extreme cases, a taxpayer accused of evading taxes or filing a false tax return could face criminal prosecution.<\/p>\n<h3><img decoding=\"async\" loading=\"lazy\" class=\"size-medium wp-image-574 alignleft\" style=\"float: left; padding-right: 1em;\" src=\"https:\/\/www.amp.legal\/blog\/wp-content\/uploads\/2018\/06\/Tracking-chart-300x167.jpg\" alt=\"\" width=\"300\" height=\"167\" srcset=\"https:\/\/www.amp.legal\/blog\/wp-content\/uploads\/2018\/06\/Tracking-chart-300x167.jpg 300w, https:\/\/www.amp.legal\/blog\/wp-content\/uploads\/2018\/06\/Tracking-chart-768x427.jpg 768w, https:\/\/www.amp.legal\/blog\/wp-content\/uploads\/2018\/06\/Tracking-chart-700x389.jpg 700w, https:\/\/www.amp.legal\/blog\/wp-content\/uploads\/2018\/06\/Tracking-chart-520x289.jpg 520w, https:\/\/www.amp.legal\/blog\/wp-content\/uploads\/2018\/06\/Tracking-chart-360x200.jpg 360w, https:\/\/www.amp.legal\/blog\/wp-content\/uploads\/2018\/06\/Tracking-chart-250x139.jpg 250w, https:\/\/www.amp.legal\/blog\/wp-content\/uploads\/2018\/06\/Tracking-chart-100x56.jpg 100w, https:\/\/www.amp.legal\/blog\/wp-content\/uploads\/2018\/06\/Tracking-chart.jpg 900w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/>Crypto Tax Planning 101<\/h3>\n<p>An article from CoinCentral,\u00a0<a href=\"https:\/\/coincentral.com\/cryptocurrency-taxes-101-know-come-tax-season\/\" target=\"_blank\" rel=\"noopener noreferrer\"><em>Cryptocurrency Taxes 101: What to Know Come Tax Season<\/em><\/a>, by Mario Costanz, points out the importance of recording each transaction. Constanz explains that a crypto-investor must record the cost basis, which is the amount paid for the virtual currency. Later, when the investor sells the virtual currency or makes a purchase, the investor must record the selling price. At tax time, the IRS expects crypto-investors to report the profit or loss on their tax returns<\/p>\n<p>Investors that make multiple exchanges have to account for each transaction. To help investors, websites such as <a href=\"https:\/\/cointracking.info\/\" target=\"_blank\" rel=\"noopener noreferrer\">CoinTracking.info<\/a> and\u00a0<a href=\"https:\/\/www.cointracker.io\/\" target=\"_blank\" rel=\"noopener noreferrer\">CoinTracker.io<\/a>\u00a0offer tax management software that securely auto-syncs to each transaction.<\/p>\n<h3>Track Everything and Keep Records<\/h3>\n<p>To be ready for taxes, investors need to maintain accurate records of every cryptocurrency transaction. <a href=\"https:\/\/www.technologyreview.com\/s\/610859\/americas-cryptocurrency-tax-policy-is-confusing-everyone\/\" target=\"_blank\" rel=\"noopener noreferrer\">Examples of transactions<\/a>\u00a0that should be recorded are listed below.<\/p>\n<p>1. Purchasing cryptocurrency \u2013 record the date purchased and amount paid for:<\/p>\n<ul>\n<li>Buying coins (amount paid)<\/li>\n<li>Mining coins (value when received)<\/li>\n<li>Cryptocurrency gifts (fair market value)<\/li>\n<\/ul>\n<p>2. Selling cryptocurrency \u2013 record the date sold and amount received for:<\/p>\n<ul>\n<li>Selling coins (amount received)<\/li>\n<li>Everyday purchases (cost of item)<\/li>\n<\/ul>\n<p>Tracking cryptocurrency transactions will provide accounting for the difference between the original amount paid and the amount received when sold. The difference will result in either a profit or a loss. While an investor must report the profits, the investor can also <a href=\"https:\/\/www.forbes.com\/sites\/greatspeculations\/2018\/01\/12\/counting-cryptocurrency-gains-and-losses-without-running-afoul-of-irs-rules\/#3b3b0d601a61\" target=\"_blank\" rel=\"noopener noreferrer\">deduct losses<\/a>\u00a0up to $3,000 against other income.<\/p>\n<p>Online tools help investors with record keeping. To learn more about organizing tax records, visit: <a href=\"https:\/\/coincentral.com\/3-easy-tax-planning-tools-cryptocurrency-investors\/\" target=\"_blank\" rel=\"noopener noreferrer\">3 Easy Tax Planning Tools for Cryptocurrency Investors<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>While some investors see quick gains selling cryptocurrency, they must comply with the tedious task of tracking their profits.\u00a0For tax purposes, the IRS treats virtual currency as property. The IRS considers cryptocurrencies to be capital [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":578,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[35],"tags":[59,34,84,86],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Cryptocurrency Tax Planning Basics - Cyber Law Blog<\/title>\n<meta name=\"description\" content=\"Cyber Law Blog explores legal topics with technology including privacy law and cybersecurity.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.amp.legal\/blog\/crypto-tax-planning-basics\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Cryptocurrency Tax Planning Basics - Cyber Law Blog\" \/>\n<meta property=\"og:description\" content=\"Cyber Law Blog explores legal topics with technology including privacy law and cybersecurity.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.amp.legal\/blog\/crypto-tax-planning-basics\/\" \/>\n<meta property=\"og:site_name\" content=\"Cyber Law Blog\" \/>\n<meta property=\"article:published_time\" content=\"2018-06-03T17:49:45+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2018-06-13T13:07:56+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.amp.legal\/blog\/wp-content\/uploads\/2018\/06\/Bitcoin-Tracking.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"900\" \/>\n\t<meta property=\"og:image:height\" content=\"500\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Alice M. 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