Cryptocurrency investors are needing to treat their income tax returns with more care as increasing scrutiny is cast over private crypto assets as the industry continues to develop.
Many countries around the globe have revised their tax laws over the past 12 months in order to integrate cryptocurrency assets into the annual tax return procedure.
Last year, the G20 had already begun to raise the topic; in its July report, the body’s Financial Stability Board (FSB) noted that previous analysis of crypto-asset markets, which included initial coin offerings (ICOs), had brought forth awareness surrounding significant challenges such as rapid market development, lack of transparency (with regard to identity and location of token issuers), as well as governing laws for white papers and gaps in data. In Buenos Aires in 2018, a G20 statement suggested a universal approach due to cryptocurrency’s worldwide popularity, declaring:
“We will seek solutions for the international taxation issue accompanying the digitization of the economy and will continue to collaborate.”
In December last year, the UK took its own steps in order to prepare for the future, publishing a comprehensive guide detailing the circumstances or instances in which a crypto holder, trader or someone who receives payment in the form of crypto would need to pay taxes.
Those moves built on the work laid out by the UK’s Cryptoasset Taskforce (CATF), an entity comprised of the UK Treasury and the Financial Conduct Authority (FCA), who, in a bid to regulate the nascent sector, have optimistically endeavored to examine and study cryptocurrencies and blockchain technology.
In the US, the IRS has already declared that one of their core campaigns in 2019 will be to concentrate on the taxation of cryptocurrencies after an announcement to that effect on 2 July 2018.
For holders of cryptocurrencies, there are steps that can be taken to take the pain out of the process of filing tax returns regardless of location around the globe. These include keeping tabs on where cryptocurrencies were both bought and sold and keeping a good record of such transactions.
As income is clearly something that tax officials will always target, all payouts, whether for work or mining, or any cryptocurrency received as an income, should be recorded for reference and return purposes. In this regard calculating gains and losses will be important factors. There are numerous formulae online for calculating a workable capital gain calculation. Losses can also be reported in order to lower tax bills.
Crypto tax specialists are now far more common due to the global usage of digital currency and may save a hefty tax bill.
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