Did you invest in crypto last year? Make sure you answer these 3 questions before filing your taxes

After cryptocurrency adoption hit new speeds in 2021, the tax-filing deadlines related to those budding bitcoin and expanding ethereum portfolios are suddenly coming up just as fast.

Days from now, on April 18 in most places, the IRS wants one of two things from the millions of taxpayers who haven’t done it already: either an extension request or a tax return.

And if it’s a tax return that’s getting submitted, the taxman wants either a ‘yes’ or a ‘no’ regarding a person’s crypto activity over the past year. “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?,” asks the IRS’s Form 1040.

That question might fluster many people, according to Shehan Chandrasekera, head of tax strategy at CoinTracker.

Crypto adoption has grown, but the crypto tax literacy hasn’t caught up, explained Chandrasekera, whose company offers platforms to track an investor’s wallets and exchange activity in order to tabulate their gains, losses and tax obligations.

The lack of tax literacy reflects crypto’s uniqueness and its capacity to do things other assets cannot, he said. For example, a person can swap one currency for another, and that’s a taxable event. But a stock investor would have to cash out and buy, instead of directly swapping one stock for another, he noted.

For a crypto newcomer, Chandrasekera said “that’s a novel concept. ‘Why do I pay taxes because I never realized any cash?’”

Approximately three quarters of crypto investors weren’t ready to file their taxes as of late March, according to a recent CoinTracker survey. Around one-third said they hadn’t put aside money to pay for their 2021 capital gains and 8% weren’t sure, the survey found.

It was a small, 100-person sample polled from mid- to late March, but it’s a peek at a larger issue.

Almost two in ten Americans say they’ve invested, traded or used cryptocurrency, according to a Pew Research Center poll in November…

Read complete post here:
Source link