Yes! We complete your crypto reconciliation, gather all your information in our online portal and complete your Federal and state tax returns.

Yes. The IRS issued a policy notice in 2014 expressly stating that Bitcoin and other virtual currencies are taxable as property. While many investors believe that digital currencies fall under loopholes or exemptions to the tax code, this is far from the case. The IRS is ramping up enforcement against cryptocurrency investors, and the agency is even going after investors retroactively as far back as 2013.

In many ways, virtual currency operates just like legal tender. It can be exchanged, used for purchases, loaned out or given away. It is a store of value and a medium of exchange, but it is not considered legal tender in any U.S. jurisdiction. In the United States, the federal government is the only entity that can officially create money, and it has established the dollar as the legal tender. Unless Bitcoin or some other virtual currency legally replace the U.S. dollar under federal law, it will be taxed as property or some other similar asset.

Under U.S. law, a property can be “real” – meaning buildings or land – or “personal” – meaning assets that you own other than real estate. Personal property can be tangible, like your car or your prized stamp collection, or it can be intangible, like the rights to a copyrighted image or musical score. So, cryptocurrencies would qualify as intangible personal property under U.S. tax policy.

Under U.S. law, a property can be “real” – meaning buildings or land – or “personal” – meaning assets that you own other than real estate. Personal property can be tangible, like your car or your prized stamp collection, or it can be intangible, like the rights to a copyrighted image or musical score. So, cryptocurrencies would qualify as intangible personal property under U.S. tax policy.

Virtual currency wages, self-employment income, or other payments should be reported using the full fair market value of the cryptocurrency at the time the payment was made. So, for example, if you are paid one Bitcoin when the price was $10,000, but the price increased to $12,500 by the time you file your taxes, you report the income as $10,000.

If you invest in cryptocurrencies, it’s likely characterized as a capital asset by the IRS. A capital asset is a significant piece of property like real estate, vehicles, stocks, bonds, or valuable collectibles like art or antiques. Capital assets owned for more than one year produce what is known as a capital gain (or loss). Capital gains are taxed differently than earned wages or self-employment income, and the rates vary based on your tax bracket.

On the contrary, capital assets owned for less than one year produce a short-term gain (or loss). Short-term gains are taxed at the ordinary income rate, which is determined by your taxable income. These tax rates are changing with the federal tax reform coming in 2018, so be sure that you’re up to date on how the new laws affect your investment.

Many of us use software and apps to help us manage our finances. However, when it comes to the fast-paced and constantly-changing world of cryptocurrency investments, not consulting with a tax professional when setting up or managing a virtual currency portfolio is a mistake.

Your hometown accountant may not be totally up to speed on the latest rules and regulations affecting cryptocurrencies. Fortunately for you, all Happy Tax CPAs have been specially trained in the tax treatment of Bitcoin and other virtual currencies. As a result, you can count on Happy Tax to get you the tax planning and preparation services you need to give you some much-needed peace of mind come tax season.