Cryptocurrency has really taken off in the last ten years and is now being used all over the place. It mainly serves as a way to trade, a value measurement, or a storage method. So, whether you're getting, holding, trading, or sending these digital coins, knowing how crypto taxes work is crucial. Just like how the IRS handles taxes for commodities, trading or using cryptocurrencies usually means you’ll owe some taxes.
Even though the whole crypto tax scene is still fresh, the IRS is pushing hard for everyone to comply. This guide breaks down crypto taxes and points out some situations where taxes are applicable.
Crypto Taxes
Generally, just holding onto cryptocurrencies isn’t taxable; you don’t owe anything just for having them. But since these cryptos can be used as money, a store of value, and a way to measure worth, the IRS sees them as property when it comes to taxes.
That means any profits you make from your crypto holdings are taxable. This doesn’t count for trading crypto in tax-exempt accounts like an IRA, though. Figuring out what counts as a taxable crypto event can be a bit tricky for some people. Let’s dig into the specifics of these taxable events.
What’s a taxable event?
Typically, a taxable event is any action you take that might lead to tax responsibilities for you. Common examples include getting interest payments and selling stocks.
And those who do not pay taxes, governments will confiscate cryptocurrencies. Although it looks impossible, many users store their coins in iPhones and laptops, which will transfer private keys.
https://dailyhodl.com/2023/06/18/balaji-srinivasan-warns-apple-microsoft-or-google-could-help-government-seize-crypto-from-citizens/
"In a new interview on the Impact Theory podcast, Balaji Srinivasan says that if G7 nations decide that digital asset seizure is allowed, then tech giants such as Apple, Microsoft and Google could lend them a hand.
According to Srinivasan, a vocal Bitcoin (BTC) bull, countries may decide to seize digital assets in the future in an attempt to recover from economic turmoil. He says tech giants could easily scan our devices to find and hand over private keys to authorities if they were ever ordered to do so."
In my country, there is no cryptocurrency tax. You will be prone to tax if you use centralized exchanges. These exchange companies collect tax indirectly for the government. Banks are restricted from dealing with cryptocurrencies so we don't have anything like bitcoin ATMs. But you can cheaply avoid this tax by using P2P or decentralized exchanges. So the restriction placed on banks and the lukewarm attitude of the government of my country is a blessing in disguise for me. Mining cryptocurrencies are not banned in my country but we have no mining farm because of a lack of power supply and basic infrastructure.
That is similar to how my country regulates crypto tax. I think crypto transaction tax is still crypto tax at the end of the day, at least that's how they categorize it here if I'm not wrong. It is quite small compared to other types of taxes, don't know how long this will last though.
As far as I'm aware, Bitcoin ATM doesn't need a bank to function properly. People can buy and set up their own ATMs as long as their government allows it.
Does such a backdoor exist already? People should not store their crypto saving on a device like a phone in the first place.
According to Snowden, such backdoors existed more than 10 years ago. And changing the cryptocurrency control software on the phone of any user is not difficult.
People often neglect security for the sake of convenience. Phone and exchanges are convenient, so they store their cryptocurrencies there.
Yeah, that's the unfortunate thing. Most people value convenience more than security until something terrible happened to them. Some companies also don't help at all by releasing products that value convenience more than security.
I wonder how they will use that kind of backdoors openly. If tax collection is their purpose, maybe they will use this backdoor to spy and then send notices instead of stealing them directly.
The mobile phone is very bad because it is very easy to understand who is using it. The front camera takes a photo before the call. A computer with Linux or a properly configured Windows is more secure, and it is more difficult to understand who is using it.