Laura Walter is the founder of CryptoTaxGirl. She’s an expert on tax and specializes in tax related topics for cryptocurrency and bitcoin traders. Tax has always been a bit headache for everyone, but it’s even more complicated for cryptocurrency traders. Hope this interview helps shed some light on tax questions related to crypto.
1. Hey Laura, thanks for doing the Q&A. Could you tell us a little bit about yourself and what you’re working on?
I am a CPA and I specialize in cryptocurrency. I help educate my clients on tax laws surrounding cryptocurrency and help identify ways that they can reduce their cryptocurrency tax bills. I spend the majority of my time helping people calculate their crypto gains and losses, and file their tax returns. I’m currently helping my clients that file extensions finish up the 2017 tax year, helping clients amend previous tax returns that had errors relating to cryptocurrency tax compliant, and helping others plan for the rest of 2018.
2. What are some of the biggest tax mistakes that crypto investors make?Most people don’t realize when they start trading that every time they trade one coin for another, they are creating a taxable event. Cryptocurrency is classified as “property” by the IRS, which means that you must recognize a gain or loss every time you exchange a coin for something else, whether that be for USD or for another coin. Gains (or losses) are calculated by subtracting the cost basis from the proceeds at the time of sale. This means that if you bought some Bitcoin for $10, it went up in value to $100, and then you used it to buy $100 worth of Ethereum, you would have a $90 taxable gain. Because of this, if you create gains via your trades, you should set cash aside accordingly to pay your tax bill. A lot of people failed to do this at the end of 2017 when prices were sky high, and now they are forced to pay taxes on large gains with coins that are worth less than half of their value at the end of 2017. It’s a tough spot to be in for sure.
I think another “mistake” (but most likely intentional) is that people think that it isn’t that big of a deal to not report crypto on their tax returns. Not reporting your crypto tax gains/losses is tax fraud. The IRS does not require coin exchanges to report taxable gains (yet), but they are not going to let you get wealthy without taking their piece of the pie. Failing to pay taxes on your gains is not only a federal offense, but it can have costly long-term tax consequences. The IRS has already taken steps to identify those who have (and more importantly those who have not) been reporting, but for now, you are responsible for keeping track of and reporting your gains and losses
3. If investors already owe tax from the previous years from their crypto gains, what can they do about it now?
Make sure that they are compliant. If they filed an extension for 2017, they have until October to get all of their gains and losses figured out, but if they have already filed, or if they have failed to report their crypto gains in previous years, then they should amend their tax returns. It’s actually really easy to do, and it will give you the peace of mind, knowing that you are tax compliant. In most cases, there will be interest and penalties, but in some cases, you can ask the IRS for a one-time forgiveness of interest and penalties.
4. What do you think the future is for blockchain technology?
The sky’s the limit at this point. I think in a few years we will look back and see our current time as blockchain infancy, and be amazed at how far it has come!
5. Do you invest in crypto yourself? If so, what are your most favorite coins?
I’m a casual investor. My husband is the big crypto nerd in the family. I probably have to stick with BTC as my favorite coin. It’s just the original, ya know? And when it goes up or down, almost everything also follows suit (to some extent).
6. What tax advice would you give to current crypto investors that haven’t sold their crypto yet?
If you can, wait at least one year before selling your appreciated crypto. In a lot of cases, if you sell your crypto that you’ve held for less than a year, you’ll end up paying double the amount of tax on your gains then you would had you waited one year. Obviously crypto is so price sensitive though, so sometimes it’s hard to wait a year. If that’s the case, make sure you set aside cash at the same time you realize your gains!
7. What are some of your most favorite crypto apps?
Oops I don’t really know that many crypto apps. I basically only use the Coinbase app lol. I’ve heard Satoshi’s place is cool though!
8. Do you have any tax advice for crypto investors outside of the USA?
Talk to a tax advisor in your country to make sure you understand the tax laws in your country 🙂
9. What’s the best way for people to contact you?
You can find me at cryptotaxgirl.com, shoot me an email at email@example.com, or follow along on Twitter @cryptotaxgirl for free tax tips!
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