GET HELP WITH PAYING TAXES ON CRYPTOCURRENCY AND YOUR BITCOINS

What is CRPYTOcurrency OR Bitcoin?

cryptocurrency is a digital representation of value, other than a representation of the U.S. dollar or a foreign currency (“real currency”), that functions as a unit of account, a store of value, and a medium of exchange.  Some virtual currencies are convertible, which means that they have an equivalent value in real currency or act as a substitute for real currency.  The IRS uses the term “virtual currency” in these FAQs to describe the various types of convertible virtual currency that are used as a medium of exchange, such as digital currency and cryptocurrency.   Regardless of the label applied, if a particular asset has the characteristics of virtual currency, it will be treated as virtual currency for Federal income tax purposes.

The IRS will recognize a gain or loss with cryptocurrency and bitcoin

Yes.  When you sell virtual currency, you must recognize any capital gain or loss on the sale, subject to any limitations on the deductibility of capital losses.  For more information on capital assets, capital gains, and capital losses, see Publication 544, Sales and Other Dispositions of Assets.

Heathers Bookkeeping and Tax Services have forms about paying taxes on cryptocurrency and bitcoins. The 2020 form 1040 asks whether any time during 2020, did you receive or sold or sent, exchanged or otherwise acquired any financial interest in any virtual currency. No. If your only transactions involving virtual currency during 2020 were purchases of virtual currency with real currency, you are not required to answer yes to the Form 1040 question.

How do you determine if my gain or loss is a short-term or long-term capital gain or loss?

If you held the virtual currency for one year or less before selling or exchanging the virtual currency, then you will have a short-term capital gain or loss.  If you held the virtual currency for more than one year before selling or exchanging it, then you will have a long-term capital gain or loss.  The period during which you held the virtual currency (known as the “holding period”) begins on the day after you acquired the virtual currency and ends on the day you sell or exchange the virtual currency.  For more information on short-term and long-term capital gains and losses, see Publication 544, Sales and Other Dispositions of Assets.

If you invested in crypto last year, you may have to pay taxes this year.

Yes, your Bitcoin, Ethereum, and other cryptocurrencies are taxable. The IRS considers cryptocurrency holdings to be “property” for tax purposes, which means your virtual currency is taxed in the same way as any other assets you own, like stocks or gold. And the start of tax season is right around the corner — Jan. 24, 2022 to be exact.

2021 was a big year for crypto, with many new investors buying in for the first time. More than half of current Bitcoin investors began investing in the last 12 months, according to a recent study by Grayscale Investments. The crypto market hit multiple all-time highs and lows throughout the year, leading to large gains and losses for many investors.

We can help with your Crypto Taxes or Bitcoin Taxes

NEW TAX REFUND RETURN DATES 2022

Will the 2022 tax filing season be normal? it’s not likely that when Spring 2022 comes around that everything will be like it was in 2019 or before. Covid-19 will still be a concern, several stimulus tax laws will still be challenging for some filers, and new tax laws may very well be created between now and then that add more complexity.

[The estimated refund date chart is below if you just want to scroll down.]

But the income tax filing process will likely be closer to normal than either 2020 or 2021 were, which both had extended filing deadlines due to closures of IRS offices, the tax courts, and IRS and tax firm staff being new to remote working.

In other words… be ready to have your taxes filed (or an automatic extension filed) by Friday, April 15, 2022. The good news is that the federal and state income tax returns filing process should be closer to normal, as well. Depending on when a taxpayer files, they can often receive their tax refund payments (check or direct deposit) within only 2-3 weeks.

Traditionally (meaning pre-Covid), the IRS starts accepting tax returns during the last week of January. If major new tax legislation is passed at the end of the year, however, this could push the start of tax season back by a week or two. So, early tax filers who are a due a refund can often see them as early as mid or late February. However, taxpayers with the Earned Income Tax Credit or Child Tax Credit generally have their refunds delayed by about one month while the IRS confirms eligibility for these credits.

Although the last two tax filing seasons were significantly impacted by the Covid-19 pandemic, and the IRS extended both deadlines, the IRS is not expected to extend the tax filing deadline for 2022.

The below chart shows an estimated timeline for when a taxpayer is likely to receive their refund, based on the information we have now, and using projections based on previous years- and depending on when a person files their return. If your IRS income tax refund is delayed after you’ve filed, ask your tax professional, or simply use the “Where’s My Refund?” tool on the IRS website.

Most Americans who are expecting an income tax refund receive it by direct deposit in as little as 2 weeks, although it can take longer during the peak of the filing season, which starts in late March. So it’s a good idea to e-file your tax return as soon as you have all of your tax documents (like your W2, 1099s, mortgage and student loan interest, and other items).

Several factors can determine when a taxpayer may receive their tax return, including:

• How early they file
• If the taxpayer is claiming certain credits (especially EITC and CTC)
• Whether the return is e-filed or sent by mail
• Whether the taxpayer has existing debts to the federal government
• The Covid stimulus payments sent out earlier in the year will not affect your income tax refund. (However, some taxpayers who did not receive one, may be determined to have been owed one, in which case they may be able to have it added to their 2022 refund as a credit. Ask your tax professional.)

Note: The IRS will delay processing by 2-3 weeks if an income tax return has the Earned Income Tax Credit (EITC) or Child Tax Credit (CTC), since these credits are often misused. The additional time allows the IRS to verify that taxpayers qualify for the credits.

So, here’s the chart you were looking for. If the IRS changes tax season this year, we will update this chart. And remember: This is an estimate of when to expect your refund. It is not exact, as all taxpayers have different returns and situations.

* = IRS may delay start of tax season by a week or so.

** = Returns with EITC or CTC may have refunds delayed until March to verify credits.

*** = Filing during peak season can result in slightly longer waits.

IMPORTANT: If you file electronically (using an online tax program or preparer), the IRS will notify you of the actual date they “accepted” your return. This is often 1-3 days from the time you actually hit the “file” or “submit” button, and it is this date that you need to use for the above chart.

Taxpayers who mail a paper version of their income tax return can expect at least a 3-4 week delay at the front-end of the process, as the return has to be manually entered into the IRS system before it can be processed.

Be Safe – Hire a Professional

Taxpayers who use a professional, such as a CPA or EA, can ask that professional for the estimated date of their tax refund, and they can be more confident that their taxes have been properly (and legally) filed.

In general, the IRS says that returns with refunds are processed and payments issued within 21 days. For paper filers, this can take much longer, however. The IRS and tax professionals strongly encourage electronic filing.

What If You Can’t File Your Income Taxes By April 15?

Taxpayers who don’t have all of the paperwork needed in order to file their taxes can easily file an extension form, “Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.” – This will give the taxpayer until October 15 to file their tax return. No reason or excuse is needed to receive this extension, and as the title states, it is automatically granted.

However, if a person will owe taxes, it is still their obligation to pay those taxes by April 15, even if they have requested an extension to file. A professional can assist with this. Those who are due a refund generally only need to file the extension request by April 15. Any tax professional and most do-it-yourself tax programs can perform this task.