Know What’s Owed: How Silver Tax Group Can Help You File Cryptocurrency Taxes

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Bitcoin itself is not taxable. Why? Because it’s not fiat money.

Fiat currency is money backed by a government. And the government claims the “right” to tax your dollars because they created those dollars and they regulate those dollars.

Cryptocurrencies like Bitcoin aren’t backed or regulated by a government. They’re backed and regulated by a set of algorithms. 

So, how is it that we’re talking about cryptocurrency taxes right now? Well, the government is excellent at finding ways to tax whatever income or wealth you accrue. And they’ve figured out legal ways to claim taxes on your cryptocurrency. 

Here’s how they’re doing that and how we can help you untangle your cryptocurrency taxes. 

How the U.S. Government Can Tax Your Cryptocurrency

Again, technically the IRS can’t tax your Cryptocurrency. The IRS itself even admits your crypto has no “legal tender status in any jurisdiction.” 

In its original form, cryptocurrency is private property with no value outside of itself. Then why does the U.S. Government feel it can even talk about taxing your crypto?

Let’s take private land, for example. Why can local governments tax land if it’s private? The government doesn’t own your land.

Once you exchange the land for money, it now has value tied to the U.S. Dollar which is the property of the U.S. Government. The value of the property is now public and the government can now send you letters requesting taxes on your property.

Examples That Back the IRS’s Case

One other form of exchange you might think is tax-exempt is bartering. And if you were able to create ex-nihilo some sort of object and trade it with another object created ex-nihilo, technically the government couldn’t tax your trade.

Unfortunately, we really can’t create ex-nihilo and almost all materials we could exchange have a monetary value. This is why when businesses exchange for goods and services instead of cash or credit, they are supposed to report those exchanges as income. 

The Linden Dollar

Before cryptocurrency exploded in our faces, there was the Linden Dollar. In “Second Life,” a virtual world with virtual assets, you could buy and sell with the Linden Dollar inside the game.

If this currency remained solely within the game’s universe, the U.S. couldn’t tax it or your assets within the game. But as soon as you could exchange Linden Dollars for U.S. Dollars, the currency and everything within the virtual world became tax liable

Like the Linden Dollar, Bitcoin and other cryptocurrencies become value-laden property once you exchange it for a product or service already tied to the U.S. Dollar. This is bartering according to the IRS and bartering imputes value.

Why a CPA Might Not Be Much Better Than Filing on Your Own

You’re probably panicking right now. You’re looking up the number to your local CPA. 

Before you hit “send”, hear us out. 

The Actual Tax Filings Aren’t Complicated

If you’re not already using a CPA for your tax filing, then you don’t need one for your crypto transactions. Why? Because you treat it just like any other property you own.

If you own a house or a car, you report your crypto exchanges in exactly the same way. You list all of your trades on IRS Form 8949, and then transfer the total gains to your 1040 Schedule D.

If you’re trading stocks, you’ll recognize these steps.

CPAs Aren’t Experts On Cryptocurrency Law

The IRS has said little on cryptocurrency taxes. They sent one letter pointing to bartering and declaring cryptocurrency taxable property. That’s it. 

In the end, you’ll end up paying a CPA to do something you could do just as well yourself.

CPAs are busy individuals. And crypto is a complicated new technology. It’s unlikely most CPAs have taken the time to become experts in cryptocurrency taxes and the laws associated with them. 

Only trust CPAs who advertise their expertise in cryptocurrency—and even then you might want to be leary. Do an interview with your potential CPA to be sure they are knowledgeable in cryptocurrency law. 

Why Should I Hire A Cryptocurrency Tax Lawyer To Help Me File?

How long before reading this article did you find out about taxes on cryptocurrency transactions? If you didn’t know you needed to file taxes on your cryptocurrency transactions, you likely weren’t tracking the real-time value of your currency at each trade.

It’s ok. You’re not alone. Plenty of people are in the same boat you are.

The IRS requires you to keep track of your gains and losses just like stock assets. If you haven’t been doing this, you can use crypto tax software to go back and calculate your gains and losses. 

But if you get audited, you’re going to need some help justifying your filings and fixing them. This is where a lawyer who knows tax law might come in handy. 

The FBI and Homeland Security Are Getting Involved

You are likely not a criminal. But criminals love the anonymity of cryptocurrency. 

The FBI and Homeland Security are putting their resources into catching money launderers and criminals who use crypto to their advantage. If you’re not reporting your currency and your transactions, you’ll be under their scrutiny (though you’re probably under their scrutiny either way).

Now, if you get audited and or charged, they have to prove you were purposely hiding your earnings. And thus the best course of action is to report and pay on what you owe immediately.

What to Do If You Find Yourself at Odds Over Cryptocurrency Taxes

If the IRS is coming after you for your cryptocurrency taxes, it’s time to hire a dedicated tax lawyer. We understand the ins and outs of tax law. 

If you need help with cryptocurrency tax law, sign up for a free consultation today. 

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