In today’s edition, we are getting ready for tax time as Anthony Tuths from KPMG gives an overview of crypto tax preparation and the rules to be followed.

Then Layne Nadeau from NVAL answers questions about taxes and NFTs in ASK and Expert.

– – Sarah Morton

Tax Time – What you need to know about crypto charges

The tax year 2024 has ended and the tax archive season is now upon us. If you have traded crypto, there are some things to consider. The first is, make sure not to waste time. While a large American centralized exchange may give you an IRS form 1099, other exchanges probably won’t, so you need time to organize your own tax registries. Even if the exchange gives you a 1099, it probably won’t have cost base information. And most non-American stock exchanges and defi-protocols don’t give you tax information.

To calculate accurate gains and losses, you must have accurate trade registers for each trade, including the cost basis for the symbols sold. You will probably need to withdraw this information from the exchange if you could not run simultaneous items while shopping in 2024. Also note that in the future, for trading in 2025 and above, you will need methods for “tax parties” – ie , Choose which part of fungal tokens was sold and their related tax base, even if you use first-in-first-out-out (FIFO) methodology, on a wallet-for-wallet base. For example, if you sold from wallet number 4, you cannot identify a token from wallet number 7 as it sold token; You can only identify a tax slot from wallet number 4. As a result, you may want to consider consolidating wallets. Per IRS Rule 2024-28 should also be made to tax parties before your first trade in 2025.

Apart from good storage and tax base tracking, all kinds of income and expenses in crypto should be considered. For example, did you receive an air drop of a token that had value at the time of drop? Remember that ordinary income is equal to the fair market value of the token from the time you had the power to sell it, whether you did or not (see IRS rule 2019-24). This income subscription amount then becomes your tax base and a future disposition will result in a capital gap or loss based on this tax base.

Did you also serve crypto for services you provided as an employee or independent contractor? In this case, you had reportable income corresponding to the received fair value of the received crypto. This income is also subject to salary withholding or self -employment tax.

On the way into the last months of 2024, you may have sold some of your digital assets dealing with a loss (ie loss of loss). In that case, these losses can be used to offset your taxable gains and reduce your tax liability. This is true, even if you bought the same symbols back shortly after selling them, as there is currently no rule of washing sales to buy and sell crypto. Remember this during 2025 to reduce your future taxes.

Even after loss of loss, did you still end up with taxable gains for 2024? You may still be able to contribute to your IRA if you haven’t already done so to create a deduction for 2024. In most cases you have until April 15 to do this. And even if you can’t contribute crypto to an IRA if you have a self -controlled IRA, you can contribute Fiat to it and then use these remedies to buy crypto.

Eventually you bought a Bitcoin or ether Etf? Note that even if you did not sell ETF in 2024, you can still have tax liability. This is because the ETFs are structured as Grantor Trusts and they sell small amounts of crypto every month to finance management fees. Each ETP publishes a tax report for the year and posts it on its website. This report tells you how to calculate your winnings/losses for the year as a unit of trust. These tax gains and losses can currently be reported by you.

Good luck taxing !!

-Anthony tuths, digital asset practice Leader Tax Principle Alternative Investments, KPMG LLP

Ask an expert

Question: How is not -bargaining symbols (NFTs) for tax purposes?

ONE: In many jurisdictions, NFTs are considered digital assets and are subject to the same tax rules as cryptocurrencies. Some jurisdictions look past this simplification of the underlying assets associated with NFT, and use the appropriate tax treatment for these assets (eg money market funds, Art & Collectibles, private debt, etc.). Consulting a tax accounting professional is recommended.

Question: Can “Floor Price” be used to calculate the value of non-fun assets for tax purposes?

ONE: No, a floor price is not accepted by formal accounting or tax standards. A service that uses accepted accounting methods, such as market comparisons, is required to calculate an acceptable fair value. Accounting providers specialized in digital assets will have these service providers in their partner networks.

Question: Can a tax loss be realized for NFTs that have lost their value/market?

ONE: Yes, if the sale of token is no longer an option, there are services (eg Unsellablenfts.com) that will “buy” illique NFTs (against a nominal fee), which makes it possible to be booked by the capital loss.

Due to the lack of guidance from most tax authorities on this topic, a potentially more secure alternative is to send your NFT to a combustion wallet by default ETH BURN address.

-Layne Nadeau, CEO, NVAL

Continue to read

• American Federal Reserve President Jerome Powell committed during a Senate consultation to tackle the so -called “banking” of legal business sectors, including digital assets.
• From February 7, 22 US states already invest in or have bills or serious suggestions about using crypto as a strategic reserve.
• Hong Kong allows Bitcoin and Ether Holdings to be used for proof of assets for visa applications.