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FAQs
Your questions, answered
My company accepts payment in USDC, ETH, and BTC, on multiple blockchains. How can I import all this on-chain activity into my accounting system?
Depending on your current system, you could make use of various crypto accounting sub ledgers.
My clients switch off making payments with traditional wires and USDC on the Ethereum blockchain. How can I reconcile both of these payment types in QuickBooks?
This can be solved using a crypto sub ledger which integrates with QuickBooks, as well as making batch journal entries.
I have a few years of on-chain activity which hasn't been reported yet, is it too late to report?
No, in fact there's no better time than right now. Additionally, to report for the current year, we have to look back at prior years to establish a cost basis and determine the length of time assets were held.
How does the timing of selling crypto affect my tax liability?
Crypto held for more than one year is taxed as long-term capital gains, which has lower tax brackets than short-term capital gains. The logic behind this, is the government wants to incentivize citizens to invest for a longer duration.
I got paid in ETH, do I need to pay taxes even if I haven't sold it?
Yes, getting paid in crypto is taxed as ordinary income just like receiving payment in USD. Once received payment in ETH, you have established a cost basis, and will realize capital gain taxes when it is sold for a gain or loss. To avoid gains/loss it is recommended that you sell the received payment immediately for USD.
Can losses on Bitcoin investments offset taxable income?
Yes, losses on Bitcoin or cryptocurrency investments can typically offset other capital gains, reducing your taxable income.
What are the tax implications of NFTs?
Non-Fungible Tokens (NFTs), akin to digital collectibles, are subject to capital gains taxes if sold at a profit. If an NFT is created and sold, it could also trigger a taxable event. When treated as art, it is subject to higher capital gains rate of 28%.
Why do I need a specialized crypto accounting service?
Traditional accounting systems are often not equipped to handle the unique and complex nature of cryptocurrency transactions. This is where OnChain Accounting steps in - we offer specialized tools and expert support to ensure precise, compliant, and efficient handling of your crypto finances.
How is Bitcoin mining taxed?
Cryptocurrency or Bitcoin mining generates income, which is subject to income tax. If the mined Bitcoin appreciates from the time of mining to when it's sold, capital gains tax also applies.
How to track Bitcoin transactions for tax reporting?
It's essential to document every cryptocurrency or Bitcoin transaction for tax purposes. Due to blockchain's decentralized nature, this can be complex. However, various cryptocurrency tax software solutions aid in tracking crypto transactions.
How are Bitcoin hard forks and cryptocurrency airdrops taxed?
As per IRS guidelines, new cryptocurrency acquired from airdrops after a Bitcoin hard fork is taxed as ordinary income based on its fair market value when received.
How are ICOs or IEOs taxed?
The taxation of Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs) can be complicated and depend on the token's nature and the jurisdiction. Often, the funds raised through ICOs/IEOs are taxable income for the company conducting it.
What are DeFi tax implications for staking, lending, and yield farming?
DeFi (Decentralized Finance) activities' tax implications, such as staking, lending, and yield farming, can be complex. Typically, rewards from these activities are treated as income when received.
What happens if I don't report my Bitcoin trades or cryptocurrency holdings on my tax return?
Not reporting income, including from Bitcoin trading or cryptocurrency transactions, can lead to penalties, interest, and potential criminal charges.
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