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Bitcoin investments are exciting – but what about taxes and the tax office?

December 8, 2021
in Crypto News
Reading Time: 3 mins read
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Bitcoin investments are exciting – but what about taxes and the tax office?
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If you invest in digital currencies, you invest in decentralised investments that organise themselves through millions of investors ¬ across all national borders. Bitcoin&Co have no national identity, they are the currency of the digital age. The difference is that the buyers or sellers of cryptocurrency usually have a passport and a residence and thus also a competent tax office with tax laws. Those who prefer to pay or invest with the blockchain out of conviction cannot avoid the fact that their national tax office wants to be informed about this. And depending on the country, and in the USA even in the state, the tax treatment of crypto transactions can look different. Even if the bitcoin is used to buy NFTs, the state wants to know what exactly happened. At the latest on the tax declaration.

Can tax software ensure that there is no hassle with bitcoin transactions? 

If you only have a few crypto coins and hold them for a long time, the effort for the tax return is manageable. But many traders have several currencies in their digital wallet as well as several wallets. If the market opportunities with more frequent purchases and sales are also used, a clean list for the tax office is already a manual challenge. The young team from Accointing developed their own tool so as not to risk any trouble with the tax authorities with the vision not to be as complicated as other tools. 200,000 users share their view and are expected to check in on the tax platform by the end of the year.

Advice goes beyond the software’s capabilities 

But a sophisticated tax software for crypto investors should of course be able to do more. Such software and the service behind must also offer an overview of international tax laws. Especially in transactions with multiple currencies and wallets, with frequent buying and selling of digital assets, questions can arise that even the most comprehensive software can no longer answer in a standardised way. 

In this case, the user is not left alone; most of all service providers offer two additional support services:

  • Most software to manage cryptocurrencies fiscally perfectly also offers a strong community. There are hardly any cases so exotic that they have never been solved by another member of the community (at Accointing, for example, they offer fast help in a Telegram group for each country). 
  • When the crowd can no longer help, most service providers offer to bring a specialised tax office with international experience on board.

Two examples show why it is so important to have a global overview: In the USA it can make a lot of sense to move across a state border because the taxes on crypto transactions are much lower in the neighboring state. But in which? Another example: In Australia the advisors draw attention to the fact that the Australian tax authority expects all crypto investors to be able to provide records of all deals for at least the past 5 years. But is it a taxable gain to sell one cryptocurrency and buy another with the profits?

Tax software providers for cryptocurrencies have a common goal

Communities on the topic of “taxes and digital money” are the opposite of bitcoin gamblers: Such a community is also meant to be an early warning system for all users and clients. Members are to warn each other about bad deals and dubious platforms. The fiercely moving crypto economy can only be screened with crowd knowledge and all reputable service providers would suffer if there were scandals around Bitcoin & Co. The compulsion for each individual to structure and present the transactions with the Digi-Cash cleanly is increasing more and more. That is why all purchases and sales of these “intangible assets” must be meticulously documented. With a software like Accointing one’s own wallets can be easily connected to the software, and the documentation and tax declaration can be retrieved at any time in a legally compliant manner.

From 2023, equal tax treatment of digital currency transactions is to be enforced across the EU, with uniform penalties for violations. There is no doubt that the EU states will not evaluate different deals for tax purposes, but one thing is already clear: comprehensive documentation of all transactions will be required for years. But without such meticulous documentation, taxes can hardly be optimised. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

Credit: Source link

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