Coinbase- Important Info for 2017 Taxes in the US

2017 has been a big year for cyrpto and with this, the US government wants their fair share. The IRS has summoned Coinbase to send them all of the names of people that have deposited or withdrawn $20,000 in their account. Also, they have been given the names of people that have sent more than $20,000 to an individual wallet from Coinbase. If you have done any of these you really need to make sure you handle your 2017 taxes correctly because alot of these people are going to be audited.

There is some important information that you need to know to handle your 2017 tax returns and how to handle your taxes dealing with cyrpto going forward. The first thing that we need to know is how cyrpto is going to be taxed. The IRS has claimed cyrpto to be property, so capital gains rates will apply to any sell or exchange of cyrptocurrency. For example, if you buy bitcoin and sell it in less than a year then you will be taxed at your ordinary rate but if you buy, hold and sell in over a year, then the gain or loss will be taxed at capital gains rates.

Let's talk about exchanging one cyrptocurrency for another one. In the IRS's eyes this is a taxable transaction and must be reported. For example if you buy bitcoin and then buy OmiseGo with it, this is considered a sell in the IRS's eyes and capital gains rates apply. So everytime in 2017 that you exchange one cyrpto for another, this will need to be reported on your 2017 tax return. This is information that I would say some investors have not kept up with but you will need to get so you can put it on your tax return.

Another thing is that anytime you bought something with cryptocurrency, this is considered a taxable transaction. For example let's say you bought $1,000 worth of bitcoin and 6 months later it was worth $2,000 and you decided to buy a gaming laptop for $2,000. This transaction would be taxable. You would have a $1,000 gain that would need to be reported on your 2017 tax return. Congress is considering passing a limitation on this where if you purchased something worth $600 or less then it wouldn't have to be reported, but this is probably a long ways from getting through Congress.

Also I know there are a lot of kids in cyrpto making a lot of money. Just because you are young doesn't exempt you from paying taxes. Anybody that has income must report it to the IRS. If you don't this is considered tax evasion and you will probably pay fines and penalties or you could go to jail based on the circumstances. My favorite example of this is Al Capone wasn't convicted of all the wrongdoing that he did but he was thrown in jail for tax evasion. If he would have just reported all of his illicit income, then the gov't wouldn't have been able to arrest him for tax evasion.

Another thing is people who mine for cyrptocurrency. This is going to be considered self-employment income. You must track how much cyrpto you are mining and report this on your tax return. You would be able to deduct some expenses like the mining equipment, electricity, etc.

People in the US, I would be really diligent when preparing your 2017 tax return over the coming months. I would be extremely diligent if you have had over $20,000 held in you Coinbase account in 2017 or 2018. Make sure you report all of your taxable transactions or make a really good faith effort to. The IRS is pretty forgiving if you make a good faith effort and get it wrong but if you just don't report your taxable income at all, they will come down on you hard.

This article doesn't not even begin to take into consideration all of the details into taxable transactions for cyrptocurrencies but it is a start. If you have any questions, just leave me a comment and I will try to answer as soon as possible.