Bitcoin Tax Preparation

As one of the first law firms to offer bitcoin tax preparation, Cross Law has one of the most experienced tax preparation departments in the country.  We began preparing tax returns for bitcoin clients in 2013 and have dealt with nearly every issue related to the taxation of bitcoin, including:

  • How to determine basis when bitcoins have been mixed in a common wallet or account
  • How to properly calculate amount realized when bitcoins are used to purchase goods and services
  • How to identify the acquisition date for bitcoins that were not purchased on a major bitcoin exchange
  • How to characterize bitcoin gains or losses (as either capital or ordinary)
  • Whether bitcoin mining is a business, activity for the production of income, or neither 
  • How to recognize income from bitcoin mining,
  • How to determine basis in bitcoins that were mined instead of purchased
  • How to deduct bitcoin mining expenses,

Our clients include miners, day traders, casual investors, early adopters, and businesses accepting bitcoin as a payment method.  As a result, we are uniquely qualified to help with your bitcoin tax preparation needs.  Contact us today to set up a free consultation and how we can help you accurately report your income from bitcoins, litecoins, and other virtual currencies.

Tax Preparation for Bitcoin Miners

Bitcoin miners face unique issues when it comes time to file their taxes.  Although there used to be some disagreement about when a bitcoin miner realizes taxable income, that matter was settled with the release of IRS Notice 2014-21.  Under this Notice, miners realize taxable income on the day the coin is awarded.  They also have taxable income when they sell the coin in the future.  This requires bitcoin miners to track the basis of their mined coins so that they can calculate the amount of capital gain (or loss) on the coin’s subsequent sale.

Another issue for bitcoin miners is determining whether their mining activity rises to the level of a trade or business.  This requires a close examination of all the facts and circumstances.  A bitcoin miner who is classified as a “trade or business” will have to pay self-employment tax on top of the ordinary income tax.

Further Reading:

When is bitcoin mining taxable?

Can I deduct mining costs?

Is bitcoin mining a business?

Tax Preparation for Bitcoin Investors & Day Traders

Compared to the stock market, investing in bitcoin and other virtual currencies is the wild west of the investment world.  Even though most bitcoin exchanges are located overseas, the income earned from trading bitcoins and other virtual currencies is still taxable.  This requires casual investors and day traders alike to track their trading activity and calculate the amount of their capital gains at the end of the year.  Of particular note is the methods that need to be used for tracking basis, with the preferred method being the First In, First Out (FiFo) method.

Further Reading:

What expenses can I deduct as an investor?

Are bitcoins a capital asset? 

When bitcoin gains taxed? 

Contact Us | Bitcoin Tax Preparation

If you have income from bitcoins or any other crypto-currency, contact us to schedule a low-cost consultation.  We provide a full range of tax preparation services and can help you accurately and correctly report your bitcoin related income.