Those who actively play the cryptocurrency exchanges – such as regularly trading in hopes of scoring rapid profit – can expect to see more tax reporting requirements as soon as next year. Part of the Biden infrastructure bill was a proposal for the IRS to increase the required reporting on cryptocurrency transactions in an effort to capture some of the runaway crypto market, especially before it takes off in earnest.
This means that everyday cryptocurrency transactions between users and their crypto wallets will be required reporting on tax returns. And you can bet Uncle Sam will be interested in taking his share.
Business transactions over $10,000 are being targeted, too, meaning some seriously large tax bills are going to be in play.
The new tax reporting requirements are hardly a surprise given that the industry’s lack of regulation in the US has contributed to a gray area in which most crypto transactions exist. Pinning down transactions and making them taxable will be a major step forward for the US in acknowledging the popularity and potential of the crypto market – but at the same time, it will certainly impact profits for crypto cowboys who would rather conduct their business outside of the government’s watchful eye and expecting hand.
Fortunately, the new proposal has been delayed. Public input on the proposal will run through October, followed by a hearing in November – in other words, most likely not enough time for 2023’s transactions to be impacted. So people have time to plan for what’s coming.
Crypto wallets will be a big part of the new requirement, as they will be sending records of transactions to the IRS. The proposal outlines a timeframe for when that has to happen, setting it out to 2025’s transactions – but it may happen sooner, depending on how much political muscle is behind it.
With more tax reporting requirements on the way for basic transactions, cryptocurrency enthusiasts have the opportunity to consider alternative ways to benefit from the market without being subject to increasingly complex and costly tax rules.
One of the best options in this case is to turn to a cryptocurrency IRA account. Operating very similarly to a conventional IRA, Self-Directed IRAs such as this enable their owners to invest in commodities of their choosing. Investing in cryptocurrency with your IRA enables you to derive the benefits whenever the crypto market increases without having any additional tax requirements. Even better, Self-Directed IRAs are tax deferred, reducing the amount of taxes you’ll pay on your crypto investments in the long run.
At BitIRA, we can help you with each step of opening a cryptocurrency IRA, including operating as a certified and knowledgeable custodian authorized to purchase cryptocurrencies of multiple types upon your request. Unlike investors who purchase crypto via a wallet to sell directly – whether in the short- or long-term – your transactions won’t be subject to the forthcoming tax reporting requirements the IRS is planning. In fact, you even receive substantial tax advantages associated with traditional IRAs. That goes a long way toward keeping your investment strategy simple, solid, and effective, and it keeps Uncle Sam out of your pocket!
Don’t wait – find out how you can start reaping the benefits of a cryptocurrency IRA today.
