Bought Bitcoin Last Year? Here Is How to Save Money on Your Crypto Taxes
You already know the serious warning of IRS which had been issued through the press releases regarding the payment of taxes on cryptocurrency profit. The statement was something like this “Taxpayers could be subjected to Criminal Prosecution if anyone convicted due to tax evasion. It is subjected to the imprisonment of maximum 5 years along with fine of $250,000”.
This statement may feel you in worry. Probably you are thinking that you are the most unfortunate person to bought bitcoin or you are finding some tricks to save lump sum money to pay as taxes. If so, then you must know the function of the bitcoin tax software to save a lump sum of money from paying as taxes.
Here are the ways which can help you to save money from paying as taxes:
Try to be the long-term investor
Taxes on cryptocurrencies will be much lower if you are the owner of it for over a year. In a single term, it is IRS Reward Patience. It is because; if you are thinking of a strategy of making any long-term investment then shorter trading for a few days will not be sustainable at all. It is one of the most prudent strategies done by the investors with the due diligence.
Cryptocurrency is the virtual currency which is used for making capital gains through investment on the non-inventory asset. The taxes for such investment for over a year are lower than that of the tax of the investment which is less than a year. This means cryptocurrency tax is really pay off to the owner in the long-term run.
How bitcoin tax software is helpful?
The software is helpful for filing the taxes and by this way you can save a lot of money from paying taxes. For this, you have to choose the appropriate software. But finding the best software is really a daunting job. There are some considerable points you must look for before installing any software. Some of them are integration, currency support, compatibility, availability of professional help and bitcoin tax review.
All of these are the common features but the review section will make your job easier and more interesting. The review section is loaded with some features of bitcoin taxes which can be used for calculating the taxes of your Bitcoin capital gain by monitoring the defined addresses.
Try to make profitability, not in cryptocurrency
It is one of the most important points which you must know about. This trick will help you to make a huge profit and even it unnoticed by the representatives of IRS. For this at first, you have to understand the dependency of the profit. Profit on the cryptocurrency is completely depended upon the two factors- Firstly, the tax bracket of your cryptocurrency and secondly, the term of owning the cryptocurrency. You can find all the information around crypto taxes on ZenLedger website.
The long-term capital gains will have to pay tax bracket with an additional charge of 20%, 15% or 0% as the tax. You have to avoid making the profit from initial cryptocurrency. For instance, if you are making an investment and it has reached a high amount you have converted to another. This will lead you to pay double taxes as IRS will see this conversion as another purchase or sale.
Keep a track record of the transaction in detail
To avoid making payment of a large sum of money as taxes, it is best to keep the track record of all your virtual asset, investment, and transaction. You can do so by maintaining them in the spreadsheet. Important data can be extracted from the cryptocurrency wallet and thus you can easily make another website for maintaining them. But remember, you have to keep the website for your personal use.
This can save you from paying a large amount of USDs as taxes. There is software which has the process of tax filing. One of the best among them is bitcoin. tax legit. If you have this software you can easily manage your transactions as it offers the easiest way for tax filing and keeping record directly. It will definitely pay you off at the end of the month and year. Let’s see how it actually works.
You can say Bitcoin. Tax is magic software which can deal with the cryptocurrency asset perfectly. All you have to do is to select the tax package according to the preference: tax firm and tax professional. Then, you have to fill up the fields like usability number, number of transactions and others and it will calculate the tax you have to pay each year.
Hire an accountant or tax attorney
Tax filing process is helpful for saving the taxes to a great extent. Only the best bitcoin tax software provides this opportunity. It is necessary to maintain on a regular basis and really become unmanageable at the end of the hectic. If this problem persists with you then, you can hire a personal accountant or tax attorney who will do it for you.
But you have to disclose all your transaction with the accountant so that he can maintain the record perfectly for preventing you from paying a large amount of money. This is probably the best way to pay the minimum taxes to the IRS hassle-free.
It can be concluded that one can easily prevent itself from paying a large amount of money by long-term investment. If you are a newborn to this world, then you must follow the above points to save your money and maintain great profitability.