The growing popularity of digital asset transactions across businesses of all sizes has brought questions surrounding taxation to light. Understanding what needs to be reported, staying informed on current regulations, and managing multiple trading venues can be challenging. To help investors navigate these challenges, sFOX held a webinar together with Bitwave to discuss the latest news trends and developments in cryptocurrency accounting and taxes.
In this webinar we talk about:
- Identifying taxable events and reporting requirements
- Overcoming challenges for successful digital asset management and tax compliance
- The newest tax regulations and trends
John, sFOX’s Chief Compliance Officer, delved into the evolving regulatory landscape. While the crypto industry has often seen regulation through enforcement, recent developments have started to provide a clearer framework. Regulatory efforts such as broker-dealer definitions and 1099 reporting requirements are emerging. However, the classification of crypto assets as securities, commodities, or otherwise adds a layer of complexity.
Pat emphasized the importance of accurate record-keeping in the crypto space. Data integrity became paramount in light of FTX’s sudden data loss incident. Joe discussed the two facets of reporting: informational reporting on tax forms and reporting income. Essential data points, including transaction specifics, dates, and fiat values, are universally vital.
The discussion also touched upon uncertainties surrounding the taxation of cryptocurrency losses, particularly in cases like FTX’s data loss. Joe pointed out that tax code intricacies require demonstrated actions for loss claims.
What is cost basis tracking and what are the requirements? 5:00
From a tax perspective, how are orders working through different locations? Does a client have to get forms from all the different locations? 7:25
Tax treatments have evolved from a one-size-fits-all approach to more refined guidelines for payments, staking and more. How does one go about filing? What are the requirements for clients? 13:30
For someone who was hacked or lost their funds due to an exchange that is no longer in service, do those losses still need to be reported? 17:56
What is considered a taxable event? 19:43
What do you foresee happening from an obligation perspective for different types of crypto platforms/exchanges? 29:17
Although there is still some gray area regarding crypto, The IRS has released draft guidance for cryptocurrency and other digital asset reporting for 2022 tax returns.
What rules have changed from last year? 30:53
What does a client need to think about long term in regard to their filings? 31:47
Another taxable event that is coming up frequently now is airdrops and staking. Is crypto that’s received through airdrops or staking taxable? What is the impact for a client? 35:35
What is the future of staking? 38:45