Bitcoin and how to pay taxes on it is one of the biggest tax issues of the season.  We are answering Bitcoin questions from anxious cryptocurrency owners just about 24/7 at AP Accounting and Tax Services here in Sanford, Florida.

Do I Really Need to Pay Taxes on My Bitcoins?

AP Accounting & Tax: Specializes in Bitcoin Currency.

Cryptocurrency & Bitcoin Experts: AP Accounting & Tax Service

There is no doubt that the most numerous and anxious tax questions this year concern how to comply with tax laws concerning Bitcoin.

We understand you do not have time to do all the preparation, calculation and research required to figure the taxes.  Amit Patel and his staff at AP Accounting and Tax Services have the essential background, skills and special training to help you comply with the new laws for taxation of cryptocurrency.

Bitcoin and the Basics:  An AP Accounting and Tax Services Bitcoin Primer for You

Here in the first month of the year, we are starting a new tradition with some of our blogs.  We are creating a Primer of basics on the most common issues of the tax season.  Overviews and definitions will give you a background in tax and accounting concepts with a minimum of jargon.  We invite you to keep the blogs in a file on your computer or print them off for reference.  As you collect them you will amass an authoritative mini-guide to tax and accounting in the 21st Century.  So, as the year continues, look for the Primer sections in blogs.

Paying Tax on the Currency of the Future

In spite of the fact that taxpayers are talking and tweeting about Bitcoins and the blockchain, few people really understand the workings of these futuristic financial terms.  So, we created this section of today’s blog as a Bitcoin Basics and Tax Primer for you.

Capital gains or losses, A.P. Accounting & Tax Service

Do You Have Bitcoin Issues? We Have Answers.

Yes, we are here for you!  And we can figure the appropriate taxes you owe on the Bitcoins you spent, traded or sold from the wealth of the Blockchain.

However, one of the reasons we are maintaining this blog is to give you a more detailed explanation of what we can do for you.

Toward that end, this primer offers something for you, whether you are:

a Bitcoin owner,

a worried taxpayer or

just curious about the Bitcoin financial fuss.

Let’s take a quick look at how Bitcoin and its fellow cryptocurrencies work.  Even if you already know this information, it is good to review it in an organized manner, here at your fingertips. Then we will reveal the 6 steps we will use to calculate your Bitcom tax.

The Saga of the Bitcoin

1.   First of all, with a little history and a little mystery, we must define some terms.  Basically, “Bitcoin is a new currency that was created in 2009 by a person who identified himself only as “Satoshi Nakamoto.” (2009! It might be a little older than you thought!)

Tax Compliance with Bitcoin and Cryptocurrency is Your Goal.

We’ll Keep an Eye on Bitcoin & Cryptocurrency. With Our Help, You will be Tax Compliant.

2.   Most people realize that cryptocurrency is simply a digital medium of exchange that uses encryption to secure the processes involved in generating units and conducting transactions. … Among them, Bitcoin is the most prominent example.

“A” is for Anatomy:  The Anatomy of Bitcoins

Below, you will find the amazing characteristics of Bitcoin.  However, if you already have an understanding of how its traits and how it functions, feel free to read ahead:

“B” is for Banking and Bitcoin Ownership:  Bitcoin currency is neither owned by a bank nor controlled by a financial institution.  “Transactions are made with no middlemen – meaning, no banks!”

A Rogue Unicorn

As you might imagine the traditional financial world eyes the Bitcoin World as a sort of rogue unicorn, galloping through the conventions of old-school financing.

C is for Card Fees:  A big plus in using Bitcoins is that there are no credit card fees for the buyer or the seller.

1.   “A” is also for  Anonymity: You use no name with a Bitcoin Account, only a number.  You utilize this currency anonymously.

2.    “T” is for Transparency:  Each Bitcoin transaction is recorded in a public log.  Members of the Blockchain network can see them, but “names of buyers and sellers are never revealed.  – only their wallet IDs…”

3.   B also Stands for Blockchain.  The innovative heart of Bitcoin commerce.  It utilizes a massive network of computers to create  “consensus in a massive peer-to-peer network to verify transactions.”   This is basically the Blockchain:  a massive number of computers all operating under a transparent system in which they all see the same ledger.

Your “wallet” keeps Bitcoin transactions private.  But think of it.  Now you can sell or buy things without a trace.

4.   “D” is for the Dark Side of the Bitcoin:  Therefore, Bitcoin got a bit of a bad reputation because it became “…the currency of choice for people online buying drugs or other illicit activities.”

5.   “L” is for the Light Side:  On the other hand, Bitcoin enables “international payments that are easy and cheap because bitcoins are not tied to any country or subject to regulation.”  Take note of this comment on regulation.  We will re-examine it when you learn to pay your Bitcoin tax.  Regulations are beginning to exist.  That’s why it’s so important to report your Bitcoin income and pay your tax in compliance with the new tax law, as capital gains.

How Business Works With Bitcoin

A.P. Accounting and Tax Service can plan your bitcoin future.

Tax Guardian of Your Bitcoin Future!

Investors buy and sell bitcoins, perhaps investors like you. Everyone wants to see them go up in value in the same manner stocks are bought and sold on the Stock Exchange.  Likewise, there are Bitcoin exchanges.

The Mysteries of Bitcoin:  Capital Gains, Taxation and Our 6 Step Solution

First, a special note:  Calculating capital gains/losses for Bitcoin is not straight-forward like it is with traditional dollars and cents.  The nature of the Bitcoin beast is that its value fluctuates widely. In 2017, it went from 13.00 to 1300.00 in a matter of months.   Therefore, it must be taxed like capital gains.

At Last, we come to the AP Accounting and Tax Services Main 6 Steps to Solve Bitcoin Tax Woes:

1.   We will save you time and money by helping you import your trade histories from the major exchanges.

2.   Likewise, we will help you track your Bitcoin income, mining and spending from such sources as Coinbase, Core Wallets, “Blockchain.Info” and CSV.

Checks We Must Do Before Calculating

Plan Today For Bitcoin Investment of Tomorrow.

3.   Of course, we must check out your FIFO, LIFO, and double check your average costing or specific identification.  According to Investopedia, “The first-in, first-out (FIFO) inventory cost method can be used to minimize taxes during periods of rising prices, since the higher inventory prices work to increase a company’s cost of goods sold (COGS), decrease its earnings before interest, taxes, depreciation and amortization (EBITDA), and therefore reduce earnings used to calculate the amount of taxes owed.”  Read more about FIFO in this helpful article. This is a lot of information to absorb, so we recommend a side trip to this link (Investopedia) to read about at this trust-worthy online source.

4.   Only then will we feel comfortable proceeding with this step:  We calculate your Capital Gains Tax

5.   We can then attach this information to your completed IRS tax form, which of course, we can also help you with.  We are full service and will provide complete tax reporting for all your needs.

6.   We give you valuable data with which to strategize 2019.  If you like our tax services, then you’ll love our customized financial advising.  When we have done your taxes for this year, we’ll consult about your fiscal life next year and your new tax strategy.  You will really value our customized support this year.  However, just wait until 2019, 2020 and 2021 when you will be able to see the beauty of financial planning, tax and account advice at your fingertips all year.

Thank you for reading our Blog.  Also, we invite you to check out other related tax reporting services on our site.