It’s called a tax-advantaged account for a reason. But what are the tax advantages of a digital IRA for cryptocurrency investors? Well, filing tax reports on cryptocurrencies is obviously a messy business.
Capital gains and losses between various altcoins might already be reason enough for any digital asset investor to want to consult a crypto tax accountant, if not hire one altogether. Then we get into some of the messier affairs in the market, such as exchange collapses and the like. “How do I organize my crypto taxes?” is an echo frequently heard among investors in this sphere.
And it’s one that seems to be getting louder as the investor base continues to grow. An online survey commissioned by Coinbase came up with some pretty interesting results. For starters, a lot of respondents would use the word “expensive” (34%), “unfair (30%) and “confusing (30%) to describe the global financial system. Hard to argue on any of those points.
Nearly a third of Americans plan to tackle this through crypto investment, among other methods. 52.3 million Americans own crypto, and 75.5 million plan to trade it sometime in the next 12 months. It goes without saying that all of them will be in the IRS’ crosshairs, with perhaps one notable exception.
What are some common mistakes to avoid when filing for taxes for crypto investments? Trying to do all the paperwork on your own is what comes to mind right away. On the other hand, do you know a good crypto tax accountant or even attorney? Do you recall how far back you ought to go to ensure everything is covered?
If your digital IRA was your entry point into the crypto market, none of this really needs to be a consideration. We’ve previously covered how none of our digital IRA users have to worry about reporting crypto taxes when using our OTC trading platform. It’s one of those overlooked perks we mentioned above. Then we can get to some of the more exotic benefits, such as free growth or even protection from collapses. Remember that even as Genesis’ boat shook, our customers’ funds were secure due to their off-balance status. Unfortunately, FTX users can’t say the same.
Getting back to the often difficult question of how do I organize my crypto taxes, the IRS recently released an outline, perhaps trying to track the latest wave of adoption. It goes without saying that the outline isn’t particularly helpful and will still be puzzling to anyone who isn’t a professional.
Fortunately, the custodian of our digital IRA happens to be. As is the case with any self-directed individual retirement account, the custodian who is charged with overseeing the investment vehicle makes annual reports to both you and the IRS. It’s not exactly a novelty in the precious metals market: gold IRA investors have reaped these benefits for decades.
But with digital IRAs being a novelty for the most part, we believe that plenty of interested crypto investors remain unaware of just how advantageous this investment vehicle is. Regardless of what the IRS cooks up down the line in terms of regulations, you won’t really have to worry, as the custodian is in charge of reporting to them. And, again, you get to enjoy both free growth and free trading within the IRA, with some clauses depending on whether you’ve opted for a Traditional or Roth IRA.
Our crypto tax Q&A was answered by who we consider some of the top experts in this particular field. You can head there to have some of your related questions answered, but also to see that it is indeed a messy endeavor that is often best left to those who specialize in it.