Are You Obligated to Pay Taxes on Cryptocurrency?

While there have been market corrections in cryptocurrency market in 2018, everyone agrees that the best is yet to come. There have been a lot of activities in the market that have changed the tide for the better. With proper analysis and the right dose of optimism, anyone who is invested in the crypto market can make millions out of it. Cryptocurrency market is here to stay for the long term. Here in this article, we give you five positive factors that can spur further innovation and market value in cryptocurrencies.

As the surprises and bottlenecks around cryptocurrencies reduce, there will be more uptake from traditional investors. This will lead to a lot of dynamism and liquidity much needed for any growing financial markets. Cryptocurrency will become the defacto currency for transactions all over the world.

Cryptocurrency has blown up over the past few years. It is a virtual currency and a digital asset that many people are investing in. Their values are hitting peak numbers, which makes many crypto owners curious if they have to pay taxes on their investments.

Many international banks are watching the cryptocurrency scene. This can lead to the entry of institutional investors into the market. The inflow of substantial institutional investments will fuel the next phase of growth of the cryptomarkets. It has captured the fancy of many banks and financial institutions.

Instead of being backed by a big government owned bank, cryptocurrency is backed by mathematical algorithms. Here’s what you need to know about paying taxes on cryptocurrency.

Cryptocurrency is Liquid

Very few countries have placed regulations on cryptocurrency. Completing transactions with individuals around the world is easy. However, the U.S. considers cryptocurrency a form of property under tax laws. Since 2014, the IRS has considered it property. What does this mean for you?

It means if you make virtual currency payments you must report them just like you would cash. Should you be paying employees with cryptocurrency, you will have to withhold taxes. If you accept cryptocurrency for payments, you also must consider self-employment tax rules for your income.

In the current scenario, most governments are studying the impact of cryptocurrencies on the society and how its benefits can be accrued to the community at large. We can expect that there may be reasonable conclusions as per the result of the studies.

Few governments are already taking the route of legalizing and regulating crypto markets just like any other market. This will prevent ignorant retail investors from losing money and protect them from harm. Abling regulations that boost cryptocurrency growth are expected to appear in 2018. This will potentially pave the way for widespread adoption in future

Also, if you have gained income from buying or selling cryptocurrency you should consider that with your taxes.

When to Report Cryptocurrency

Bitcoin is the first cryptocurrency in the market. It has the maximum number of users and the highest value. It dominates the entire value chain of the cryptocurrency system. However, it is not without issues. Its major bottleneck is that it can handle only six to seven transactions per seconds. In comparison, credit card transactions average at few thousands per second. Apparently, there is scope for improvement in the scaling of transactions. With the help of peer to peer transaction networks on top of the blockchain technology, it is possible to increase the transaction volume per second.

Aside from the things we outlined above, how you use cryptocurrency will determine whether or not you need to report it. If you are using crypto currency to fund your payroll, you may not have to report it. However, you can incur a tax liability if you use cryptocurrency for:

-Pay for services or products.

-To exchange cryptocurrency

-Exchange cryptocurrency for traditional fiat money like U.S. Dollars.

There are many rules surrounding cryptocurrency, but not many of them are straightforward. If you give someone crypto as a gift, you won’t have to pay taxes on it, but the person you give it to may. Do your research to learn more about the rules surrounding cryptocurrency. Paying taxes is never easy, but with the right amount of research and a consideration of this information, you can get one step closer to legally using cryptocurrency.