Investors Face Hefty Taxes on Cryptocurrency Purchases 4 984

Lately, it feels like there’s never any good news to come out of the crypto community. And the rollercoaster ride for so many US investors is about to take another dramatic drop. The latest monkey wrench in the works comes in the shape of the taxman, with the IRS enforcing taxes on cryptocurrency purchases.

The Internal Revenue Service announced that all goods bought using Bitcoin, or any other digital currency, would be taxed as capital gains. What does this mean for crypto owners? That if they bought or sold anything that might have capital gains using cryptocurrency, they will have to report them to the IRS.

But What About the Volatility?

Once again, the pesky little issue of price volatility raises its ugly head. How, for example, is it possible to calculate taxes owed on a past purchase, when Bitcoin value went from less than a dollar in 2010 to just shy of $20,000 at the end of last year, and back down to around $8,000, at latest check?

The taxman is not taking these fluctuations into account. And unwitting investors are exposed to tax bills that their digital stashes can no longer cover.

Taxes on Cryptocurrency Purchases

Earlier this week, a Reddit user posted an entry entitled “I just discovered that I owe the IRS $50k that I don’t have, because I traded in cryptos. Am I fu**ed?” Which sparked a flurry of nerves and backlash within the crypto community.

The contributor reported a tax liability of $50,000 on some trades he had carried out with $120,000 of Bitcoin — which now has a value hovering around $30,000. “I feel like I might have accidentally ruined my life because I didn’t know about the taxes,” he lamented.

Not Operating Outside the Tax Authorities

Many cryptocurrency investors believe that the system operates without government and financial institution oversight. This, up until now at least, may be true. However, US tax authorities still regard cryptocurrency as a property and not a currency. This means that many investors may face hefty taxes on cryptocurrency purchases and exchanges. And some other nasty surprises, as well.

To be fair, it’s currently a little confusing, seeing as crypto-brokers don’t legally have to issue 1099 disclosure forms on digital currencies. These are the forms used to report any income other than wages or bonuses.

But there’s a caveat. Individuals are still responsible for reporting any and all gains to the IRS. And in the cryptocurrency community, individuals are responsible for their own worth.

Court Intervention

Last November, Bitcoin trading platform Coinbase, was ordered to turn over information on all accounts worth $20,000 or more, during 2013 to 2015. The ruling was concluded by a US district court judge in California.

This case came about after the IRS found that only around 800 taxpayers had claimed gains made with Bitcoin during that time. The Coinbase agreement only affects some 10,000 accounts, though, and does not extend to the original 480,000 accounts first requested by the IRS.

The lesson? Not reporting gains to the IRS is tax evasion. And tax evasion isn’t good.

It Gets Worse

The ruling of capital gains is not the only complication when it comes to cryptocurrency investors and the IRS. It’s a lot more complicated than that. Say an investor sells some cryptocurrency after a year of holding it. The profits would be considered long-term capital gains. Moreover, losses are not deductible against any future tax years to come.

The problem is that many accountants don’t understand, or aren’t willing, to get to grips with taxes on cryptocurrency purchases.

Investors are unaware that there are so many ways in which the IRS can come back to bite them. A simple transaction, such as using Bitcoin to buy Ethereum or Litecoin, for example, is taxable.

Moreover, when you use your cryptocurrency to buy something, it’s not only sales tax that you’re liable for. You’re purchasing a property that is denominated in dollars and if you then exchange that, there is a tax liability. So, be sure to keep it in mind before you forget to declare your earnings.

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Christina is a technology and business communicator who has worked with high profile ICOs and blockchain influencers to break industry news.


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Fidelity to Offer Bitcoin in 401(k) Retirement Plans Comments Off on Fidelity to Offer Bitcoin in 401(k) Retirement Plans 48970

The move is the first for a major retirement plan provider and may signal more widespread adoption of the cryptocurrency. 

On April 26, Fidelity announced its intention to add a Bitcoin investment option to its 401(k) retirement plans. Employees of businesses that pursue the option will be able to allocate as much as 20% of their contributions to Bitcoin, all from the company’s main investment dashboard. According to reporting by the Washington Post, Fidelity said that at least one employer has already signed up for the option which will launch later this year.

“Fidelity’s leadership, especially CEO Abby Johnson, has been at the forefront of institutional Bitcoin and crypto integration for years and is no stranger to the space, with Fidelity’s private equity and venture capital arm being a major source of capital for crypto miners, crypto SPACs, crypto hedge funds and more,” says Eric Lamison-White, Director at STS Capital Group LLC, a cross-border advisory and investment firm. “It is completely in character for Fidelity to steadily and cautiously extend access to their working class customers as the regulatory climate becomes more productive.”

Critics suggest that the volatility of Bitcoin poses an unnecessary risk to a retirement portfolio. It’s a reasonable argument. At the time of this writing, the cryptocurrency’s price has fallen by more than 6% just today. Meanwhile, at $37,978 it’s a far cry from Bitcoin’s high of $68,000, representing more than a 40% drop since November 10th of last year. 

However, advocates of cryptocurrency’s long-term utility disagree.

“Cryptocurrency is a reliable, long-term store of value because it cannot be corrupted by central authorities,” says Lisa Carmen Wang, founder of The Bad Bitch Empire, a platform for female investors in web3. “We’ve already seen hyperinflation, bank failures, and other egregious disasters happen in the last few years, so trust in governments is at an all-time low. Crypto is inevitably volatile now because it is an early stage high-risk/high-reward investment, but for those who believe in the values of a decentralized economy, crypto is an attractive long-term investment that people should consider having in their portfolio.”

Regardless of your appetite for risk, the notion that savers will be able to easily manage contributions to Bitcoin in a respected retirement plan is meaningful.

As of last year, 63% of US adults that did not hold crypto were curious about it. Many people in the crypto-curious category don’t invest because they simply don’t know how. There’s a technological barrier to entry that can feel daunting. 

When you have major retirement plan managers like Fidelity making it easy to add Bitcoin to a portfolio through a dashboard users are already familiar with, we may see this group start investing in the asset class, moving digital currencies further along toward mainstream adoption.

How a Thief Stole More Than $1M in NFTs on Instagram Comments Off on How a Thief Stole More Than $1M in NFTs on Instagram 237

A common use case for the blockchain is reducing fraud. Shouldn’t that mean it’s impervious to hackers? Not necessarily. Here’s how a hacker was able to amass more than $1 million in stolen Bored Ape Yacht Club NFTs.

For any of us that have received a nefarious link in our emails or on social media that encourages us to input private information, we’re already familiar with the logistics of phishing. A hacker sends us a link, usually under the guise of a brand or person we recognize, and asks for personal details like usernames, passwords, or bank details that aid them in assuming our identity or assets. 

It’s precisely what happened in the case of the Bored Ape Yacht Club hack which was announced on Twitter Monday morning. 

A hacker was able to take charge of the official Bored Ape Yacht Club Instagram profile, and sent a communication to followers claiming to be offering an “airdrop,” which is a term used to describe a free token giveaway. (Note: it’s not clear at this time how the hacker was able to login to the official Instagram, in the first place.)

Users were asked to link their wallet to benefit from the airdrop, which made their mobile wallet susceptible to the hacker and resulted in the transfer of multiple NFTs, presumably including four Bored Apes and a number of other NFTs minted by the Bored Apes creators, Yuga Labs.

The hack illuminates a glaring problem in the NFT market. Namely, MetaMask, the popular wallet application, only supports NFT display on mobile which is less user-friendly than the platform’s browser extension leading to mistaken transaction approvals.

What’s the solution for NFT holders? “MetaMask with Ledger,” according to Adryenn Ashley. “NFT holders need a wallet that gives them the ease of MetaMask with the security of hardware.”

The hack is a reminder that even though the blockchain has the potential to overcome fraud, users still need to be mindful of third party applications that manage their data. 

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