National tax agencies have recently made it clear that the long arms of the law will be wielded to ensure bitcoiners pay the appropriate tax on their earnings. Motivated by surging interest in crypto, authorities are cracking the whip and instilling fear in those who have, until now, dismissed the notion that they might be pursued for tax on their trading.
Also read: IRS Dispels Crypto Tax Confusion
A Taxonomy of Crypto Tax Requirements
Quantifying gains and losses on cryptocurrency purchases, and determining which transactions are liable to tax (and which kind of tax), has long been a challenge for individuals operating in this space. Compounded their dilemma was a complete lack of direction from authorities, which have been slow to develop an understanding of the cryptosphere and tighten their regulations accordingly. In light of recently published guidance, and the spate of ensuing news coverage, however, anyone found to be willfully dodging tax cannot reasonably claim ignorance of their obligations.
Which isn’t to say that managing your crypto tax affairs is now a walk in the park – far from it. The complexities of hard forks, token sales, airdrops, mining and the heterogeneous nature of exchanges (property for crypto, BTC for ETH etc) throw up no end of questions, and every country has its own rules. Figuring out the tax due on your crypto transactions over the course of a year, particularly if you are a busy investor, can be a bit like trying to solve a riddle wrapped inside an enigma, concealed within a conundrum.
Maintain Accurate Transaction Records
To summarize: if you have bought, sold, sent or received digital currency in recent years,