How Do You Deal With Crypto Taxes?

It’s a big issue in the cryptocurrency world – taxation is different for cryptocurrency assets than it is for dollar-based investments. It’s often more confusing – and that’s partly because of the gaps that exist in regulatory knowledge and in established processes.

To put it another way, investors in the financial world have spent decades and centuries understanding how to tax assets based on national fiat currencies. But they haven’t spent more than 10 or so years figuring out how to tax cryptocurrencies, because prior to that time frame, Bitcoin and all of those other types of digital currency didn’t exist. It was actually after the collapse of the traditional global economy (in 2009) that Satoshi first mined the Genesis block – and quite suddenly, we were off to the races.

Since decentralized finance assets are so new and so unknown to a very great extent, our modern societies are still wrestling with the right ways to treat these assets, particularly in the realm of tax collection. The IRS isn’t the only tax agency struggling with how to treat crypto –but it’s the one that matters most to most Americans! No matter where you are in the world, though, it pays to know more about the tax ramifications of holding crypto assets.

Are There Taxes On Crypto?

There are absolutely taxes on the sale of crypto assets that have gained value. That’s one similarity to fiat-based transactions. But crypto is different in that it may be more difficult to calculate the cost basis that is so commonly used for tax collection purposes.

In short, there are taxes, but even with a professional preparer, you may not get a lot more guidance than that. There’s a crippling confusion around how to value crypto on a tax form, and that is having a chilling effect on investment by smaller wallets.

Regulatory Chaos

When experts consider how cryptocurrency works for the average small investor or even on an institutional basis, they encounter a range of problems based on unknowns that can throw all sorts of situations into uncertainty and doubt.

Take, for example, recent comments by the U.S. SEC chair Gary Gensler that “every ICO is a security.” This in turn indicates that many of the digital coins and tokens now sold and traded on exchanges may consist of unregistered securities not properly regulated under the aegis of this American agency.

That’s just one example of how national agencies and national banks are approaching crypto – warily, with extreme caution. Officials in many countries around the world will make remarks about the difficulty of dealing with crypto regulation. There is also intense debate around the positives and negatives of cryptocurrency assets as a whole. Where some trumpet their potential for effective and streamlined finances and their ability to solve problems for the un-banked, others declare that the inherent risk for money laundering and fraud outweighs these benefits.

Tax Reporting Assistance

How do investors deal with all of these unknowns around cryptocurrency taxation?

One way is with the kinds of preformatted and well-built tax reporting tools offered by vendors and exchanges that value clarification in crypto processes.

Atani is one of these vanguard companies that is innovating crypto taxation, with clear and transparent tracking and reporting tools for crypto assets. Get help from an exchange with vibrant transaction activity, lots of pairs, and other resources to help newcomers to establish a crypto strategy. With this kind of support, it’s easier to really get going with a crypto plan that works, and more fully participate in one of the most promising areas of modern finance.

Source: https://coinquora.com/how-do-you-deal-with-crypto-taxes/