CryptoMinded unveils research revealing the top five mistakes people make when filing taxes in 2024. The report sheds light on common errors and solutions in cryptocurrency tax reporting. The findings, sourced from four accounting and cryptocurrency experts, highlights key points such as the IRS's monitoring of crypto activity, the taxable nature of cryptocurrencies, and the pitfalls of double-accounting.
London, United Kingdom, 22nd Mar 2024 - Research has shown that 22% of young adults don’t know how to file their taxes and that 56% of young adults are intimidated by the tax filing process. Filing taxes can be a complicated process and the statistics show that.
With tax day coming up soon, the daunting task is inevitable. With even the smallest error leading to serious consequences, it’s important to get taxes done right, across all portfolios.
CryptoMinded spoke to four accounting and cryptocurrency experts to find out the common mistakes that are made with filing taxes (and solutions to the mistakes).
In the resource, the six salient points from the experts are:
- The IRS monitors all crypto activity; treat taxes accordingly.
- Many people don’t realise that cryptocurrencies are taxable, not recording crypto leads to omissions in tax filings.
- Filing before receiving all documentation leads to inaccuracies.
- Entering transactions multiple times - known as double-accounting - results in incorrect filing.
- Airdrops and hard forks are taxable; market value at receipt is reported.
- Claiming crypto capital losses can offset gains, reducing tax liability.
The IRS has robust mechanisms to monitor cryptocurrency activity, through both centralised and decentralised exchanges. For those filing their own races, it’s important to record and report crypto transactions thoroughly. One of the key mistakes many online users make when filing their taxes themselves is to exclude cryptocurrency and digital currencies in their reports.
Carter Seuthe, the CEO of Credit Summit, commented that taxes include cryptocurrency investment, noting:
“One of the most common mistakes I see with cryptocurrency taxes is people not understanding that they even need to file tax for their crypto investments. I think this is an area that’s still new enough, many people find it confusing or unclear just what they’re responsible for when it comes to crypto in their portfolios.”
David Kemmerer, CoinLedger CEO has seen many fail to record their cryptocurrency portfolio in tax because they don’t know that it’s taxable:
“I’ve found on many occasions, people believe that trading crypto to crypto does not incur tax, and only expect to pay tax on crypto to USD transactions.”
Double-accounting has also become one of the leading mistakes cryptocurrency users make when they are recording their financial activity. It’s an issue because it leads to inaccuracies which will raise flags for the IRS.
According to Mathilde Schmidt, CEO of Office Group Zug, Switzerland:
“I have found the most common mistake some of my clients make when I take over their crypto accounting is double-accounting, entering the same transaction several times.”
The best way to spot the mistakes is to use a crypto accounting tool or a system that helps to document crypto transactions with a note (such as an account number). When exporting at the end of one year, one should also make sure they thoroughly understand the structure of the various exports before inserting those into the respective journal entries.
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