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Blockchain Tax Lawyer

Blockchain attorney Dr. Nick Oberheiden

Attorney Nick Oberheiden
Blockchain Tax Team Lead
Blockchain attorney Alina Veneziano

Attorney Alina Veneziano
Blockchain Tax Team Lead

Experienced Blockchain & Cryptocurrency Tax Attorneys with Litigation and Compliance Expertise Nationwide

Blockchain technology and applications like cryptocurrencies have given individuals and businesses numerous business opportunities. However, new opportunities are accompanied by new risks. For blockchain and crypto users, those risks revolve around compliance.

If you use blockchain or cryptocurrencies to do business in the U.S., you are automatically subject to certain tax obligations. The IRS has been on record stating that cryptocurrencies are treated as property from a federal income tax standpoint.

Therefore, any entity or individual who deals with crypto casually or as part of their core business must report such transactions to the IRS. Failure to disclose such transactions fully and truthfully can attract serious federal agency enforcement actions ranging from hefty penalties to criminal enforcement actions.

At blockchainlawyer.com, we’ve established a team of blockchain tax lawyers with vast experience handling blockchain and crypto tax matters nationwide. The majority of the senior attorneys in our law firm have decades of individual experience handling regulatory and prosecutorial issues with the federal government.

We are therefore uniquely positioned to offer unmatched insight on how the government treats crypto and blockchain-related cases, including practical ways of minimizing tax liabilities associated with cryptocurrency and blockchain use.

Cryptocurrency Taxes in the US

How are cryptocurrencies taxed in America? There are over 19,000 cryptocurrencies currently (as of May 2022). While most users treat them as currency, the IRS views them as property (like stocks) subject to taxation.

How Much Cryptocurrency Losses Can You Write Off?

While taxation for property like stocks is lower than income tax, there are notable cons to consider. For instance, cryptocurrency classification limits the amount you can write off as losses to $3,000 per year.

Cryptocurrency Tax is Dependent on How Long You Hold the Crypto

Since cryptocurrency holdings are treated as property holdings, tax rates depend partly on how long the crypto is held.

Cryptocurrency and Capital Gains Tax

Cryptocurrency holdings are subjected to short-term or long-term capital gains tax rates. Crypto held for less than a year (365 days) will be subject to short-term capital gains, typically 10-37% depending on factors like your income.

Crypto held for over a year is subjected to long-term capital gains, typically 0-20%, dependent on factors like income. These cryptocurrency capital gains rates apply to 2021 –2022 but may be subject to change.

Reporting Cryptocurrency Transactions

Following the IRS’s Notice 2014-21, all cryptocurrency transactions must be reported. This applies to selling or trading. Initially, cryptocurrency holders could freely buy things using cryptocurrency. However, for this to be possible, there was a need to convert U.S. dollar assets into crypto first. Ideally, the U.S. dollar was the actual currency used for purchases.

Currently, multiple options are allowing direct purchases with cryptocurrency without the need to convert U.S. dollar assets. Nevertheless, you are subjected to the same tax liability if you purchase something with bitcoin or any other cryptocurrency or convert your crypto to dollars. All direct and indirect crypto dealings are supposed to be reported.

Blockchain Technology, Cryptocurrencies, and Money Laundering

Cryptocurrencies have some drawbacks, the main one being the nature of transactions. Cryptocurrency transactions have a pseudonymous nature which isn’t far from anonymous. While federal government agencies have ways of tracking crypto transactions, the person behind those transactions isn’t as apparent as with banking transactions.

There have been countless attempts by unscrupulous individuals and entities to use cryptocurrencies for money laundering (attempts to transform illegally obtained assets into legitimate assets/money). Historically, cryptos have attracted money launderers who thrive on the pseudonymity and scarce understanding behind these digital assets. However, federal authorities have caught up. Cryptocurrency holders shouldn’t think their transactions can’t be traced.

Blockchain Attorneys for Crypto Miners, Entrepreneurs, and Small Businesses

Cryptocurrency miners, small businesses, entrepreneurs, and individuals who handle cryptocurrency have tax obligations they must meet. Tax attorneys with expertise in blockchain and crypto-related matters can assess and handle these obligations.

A tax lawyer can assist in setting up a business entity and reporting the relevant transactions. Tax attorneys can also help in reporting sales and completing taxes. Blockchain attorneys can help with everything you require to run a blockchain business.

Most importantly, they can represent you should you be targeted by a federal government agency. Many individuals and entities that commit cryptocurrency-related tax crimes knowingly or unknowingly need legal representation when they face investigations or prosecution for such crimes.

The risks associated with cryptocurrency and blockchain-related issues demand professional help. It doesn’t make sense for individuals and most business owners to handle crypto and blockchain risks independently. The law keeps changing. The compliance risks are also significant. You could face stiff fines or jail time and damage your business/personal reputation. If you have expert up-to-date knowledge of cryptocurrency regulatory environments, hire experienced blockchain tax attorneys.

Blockchainlawyer.com represents individuals, small business owners, entrepreneurs, cryptocurrency miners, and other persons/entities that deal with cryptocurrency or blockchain technology directly or indirectly.

We handle all blockchain and cryptocurrency tax compliance & litigation matters on your behalf. Let’s answer any queries you may have. We can also conduct federal agency investigations like IRS investigations and other federal agency enforcement actions.

FAQs About Cryptocurrency Tax and Transactions

What Happens If I Do Not Report My Cryptocurrency Gains?

If your cryptocurrency dealings result in a profit or appreciation in capital, the IRS expects such dealings to be reported honestly. Failing to report or underreporting capital gains is a serious offense that can trigger IRS investigations and enforcement actions like hefty penalties and even jail time in some cases.

IRS penalties vary based on several factors, such as the withheld income and time of filing. The IRS also has minimal penalties. For instance, filing late (over 60-days late) attracts the minimum penalty of $435 or a 100 percent payment of the tax in question, whichever is lower.

The IRS can also pursue criminal charges if they suspect fraud or other criminal activity. Disregarding tax obligations frequently can also attract an investigation. Penalties for crypto-related tax wrongdoing can also be dictated by occurrence and the IRS code in question. A single count (charged for tax fraud) as per IRS Code: 7201 can attract jail time (up to 5 years) and/or a fine of up to $100,000 for a person, $500,000 for a corporation.

Are Crypto Transactions Anonymous?

No. As mentioned above, federal agencies can uncover the persons behind pseudonymous cryptocurrency transactions. If the IRS or other agencies that deal with cryptocurrency-related issues suspect wrongdoing, the person or entity behind such transactions can be traced, investigated, and prosecuted.

Cryptocurrencies like Bitcoin have had a reputation for being anonymous. However, federal agencies have high-tech mechanisms for tracking crypto transactions. They can trace conversion points to/from Fiat currency (such as the U.S. dollar) and track cryptocurrency addresses. A paper trail can always be followed to identify actual traders and conduits. Federal agencies can also use court orders to derive information from cryptocurrency exchanges.

Are Cryptocurrencies Taxable?

Is bitcoin taxable? Bitcoin and all other cryptos or virtual currencies are treated as taxable property in the U.S. The IRS issued guidelines on the taxation of cryptos back in 2014. Cryptocurrency gains are subjected to capital gains tax like any other asset.

If you profit from cryptocurrencies, you have a federal income tax obligation. In some states, you may have some income tax obligations. If you lose money trading cryptocurrency, you may not be liable to pay tax to a certain extent. Crypto investment-related losses can be written off.

While you can hold cryptocurrency without paying tax since a taxable event is triggered when selling or trading, taxes apply the moment you transact. However, holding crypto for over a year has some tax benefits, i.e., you will be subjected to a lower tax rate.

Considering there's more to cryptocurrency taxation, all crypto tax matters should be left to experts. Luckily, BlockchainLawyer.com has dedicated blockchain tax attorneys you can contact anytime.

Professional Assistance on Blockchain Tax Matters in the U.S.

Are you under investigation by the IRS, SEC, or other federal agencies for cryptocurrency-related dealings? Do you need expert help on cryptocurrency and blockchain compliance-related issues, cryptocurrency transaction reporting, etc.? If yes, BlockchainLawyer.com is here for you.

Contact our experienced blockchain tax lawyers today. The IRS actively monitors U.S. taxpayer activities related to cryptocurrencies and blockchain technology. The federal government wants to make examples out of non-compliant entities and individuals. Your chances of being targeted for crypto-related tax fraud are higher now than ever.

If you are already facing investigations or criminal proceedings, we can help you reduce or eliminate your liability. Our cryptocurrency tax lawyers have helped crypto investors, crypto miners, blockchain businesses, and regular individuals who transact in crypto to handle investigations and charges brought against them. Our lawyers work alongside an in-house team of former federal government agency employees who know how federal agencies pursue crypto-related crime.

Schedule a confidential, non-obligatory & 100% free crypto tax consultation. Call us at 888-680-1745.