Cryptocurrencies are treated differently than standard assets, which, when combined with CPA’s limited resources with extensive crypto tax knowledge, results in a stressful tax season.
The current framework is complex to navigate as the IRS treats cryptocurrencies like Bitcoin (BTC) and non-fungible tokens (NFTs) differently from other assets, classifying them as property. Since different rules apply, investors often require the help of a professional or suitable crypto tax software to record this activity properly.
Other rules add complexity to the management process by suggesting that the use of fiat currency (dollars) to purchase assets in 2021 does not require an indication in a tax report at the time of writing.
But selling or exchanging the same virtual currencies requires a report. So for those who trade a lot or have many different currencies, the sheer amount of data to navigate can add to the complexity.
While in previous years, turning to a tax professional has been an option to help with some of the more complex nuances associated with tax management, the last year has been marked by a large quit by tax professionals. With more reports of burnout and overtime caused by the COVID-19 pandemic, investors are often left on their own when it comes time to calculate accrued taxes.
This post How are taxes on cryptocurrencies declared?
was published first on https://cointelegraph.com/explained/how-are-cryptocurrency-taxes-reported