The recent surge in Bitcoin prices has been a financial boon to its investors. Many have been cashing out with gains exceeding their wildest expectations.
Bitcoins were trading in the $97K range yesterday. If you had invested in this asset four short years ago, your capital gain would be around $80K per unit.
In response to this windfall, the IRS has significantly increased its oversight on these transactions, including…
1 – A question on both business and personal income taxes of whether or not the entity has sold any crypto assets inside the tax period.
2 – Broker / Dealers will be required to report all sales of digital assets to the IRS on newly created form 1099 – DA (Digital Assets) next year for the 2025 tax season.
3 – IRS and Justice Department Enforcement of the tax and criminal codes has increased substantially.
Taxpayers should note that if you use a crypto currency to purchase anything directly from an investment account, that this constitutes the sale of the asset. As such, Short or Long Term Capital Gains Taxes are due and payable that year.
Retiring taxpayers who want to lessen the effects of estate taxes giving crypto assets to friends and family must realize that gift taxes only shield giftors to the extent of $18k per giftee. If you make the mistake of gifting in excess of that amount, the normal rules of Estate Taxes and the GSST as well as the accompanying tax consequences will apply.
Gifting digital assets to charitable organizations for Schedule A tax deductions works the same way as cash donations. Meticulous records must be maintained to be able to substantiate this deduction.
Given the fact that Crypto Assets are now being used to fund terrorist activities around the globe, our Justice Department has revved up their enforcement actions. Trust me. You do not want to be forced to talk to those individuals.
Let me leave you with this…
Accounting for these transactions has always been an unholy nightmare. The documentation we receive from the investment houses handling these currencies has always been laughable at best.
Part of this will change when the IRS requires these entities to report the sale of Digital Assets next year. But here’s the kicker.
The investment houses won’t be required to report the purchase info on those sales until 2026. What does that mean?
We’ll all still be in this same nightmare situation for another couple of years.
You cannot rely on your Broker / Dealer to provide the documentation necessary to properly do your taxes. The onus will be on you for the next couple of years to maintain the purchase and sales information for these transactions.
And your records must be exacting. Kinda, sorta, and maybe approximations won’t get it done.
Please gather this information before sending in your tax packets for this season. No one wants to end up on the 16th floor of the Kluczynski Federal Building being forced to explain your errors to our friends at the Service.
And we certainly don’t want to talk to the Justice Department. They’re a short elevator ride down on the fifth floor.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.SalarySolutions.net
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.
.