By Harness Wealth — Taxes — February 25, 2021

Cryptocurrency Tax and Accounting (CPA) Services

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Harness Wealth CPAs represent clients that invest long-term, actively trade, as well as Mine as a Business (MaaB). We’re here to help guide you through the taxes of one of the most exciting and increasingly popular technology and investment opportunities.

Cryptocurrency Taxes in the United States

One of the most common misconceptions about cryptocurrencies is that, because they are not issued by a central government, there is no need to pay taxes on profits from trading or mining them. While this is indeed the case in some countries around the world, users in the United States are not so lucky.

In the United States all profits made from the purchases and sales of digital currencies such as Bitcoin and Ethereum are subject to capital gains taxes. This is because they are treated as property (much like stocks, real estate, or gold). However, it’s important to keep in mind that all the rules that apply to these other assets do not also all apply to cryptocurrencies.

The laws around how crypto taxes work are fairly new and will continue to evolve alongside this groundbreaking technology. This makes it all the more important to consult an expert if you’ve experienced profits (or losses) via any cryptocurrency related activities this year, and to plan ahead for future years as well if cryptocurrency makes up a sizable chunk of your assets.

IRS Cryptocurrency Laws: Keeping Records, Taxable Events, and Capital Gains and Losses

While every individual’s experience is different and subject to the tax laws of their specific jurisdiction, the high-level cryptocurrency tax rules you should be aware of are that:

These bullet points are a brief summary, but there are other detailed rules and regulations around crypto taxes that any serious trader or miner should be aware of.

If you took part in anything other than simply buying crypto to hold in a wallet, you should highly consider discussing your potential tax liabilities with a professional. While the laws will continue to develop, one thing is clear: the IRS expects you to make a good faith effort in reporting cryptocurrency activities.

Cryptocurrency Alongside Your Other Assets: Help from CPAs and Financial Advisors

Harness Wealth works with tech founders, employees, and VCs — these folks were typically very early adopters of cryptocurrency given their industry, and we’ve seen crypto make up increasingly sizable portions of investment portfolios. As this happens, there are not only tax questions but overall investment management questions that arise, particularly around risk.

The technology is exciting, but many people are failing to grasp the reporting requirements as vendors play catch-up in providing users with the documentation they need (and is legally required!).

A clear understanding of your personal tax responsibilities is vital to participating in this growing economy. Sign up with Harness Wealth today to find both tax and financial advisors that will ensure that your crypto and overall assets are protected.

Top-tier firms with experience relevant to your needs

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