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It’s tax season, so sharpen your pencils for the annual ritual of labyrinthian-maze running through the IRS’s nearly 1,000 forms.

“Nothing can be said to be certain, except death and taxes,” said Benjamin Franklin.

But one thing is certain: The Internal Revenue Service is worse than death. Call it paper-boarding — call it a crime against human sanity.

Tax Deadline Waits for No Bitcoin Investor

The tax code forces you to decode more than 10 million words – 12 times longer than the Bible. In this jargon-filled obstacle course, you’ll find phrases such as “exemption to the exemption to the exemption.” I have a masters degree in accounting, and I still can’t figure it out.

Unfortunately, the government criminalizes you for not accurately complying with exceedingly complex regulations that the IRS’s own employees and so-called experts don’t understand and/or can’t clearly explain and/or can’t agree on. The bureaucrat-wasteland that Washington has become would be unrecognizable to America’s Founding Fathers.

What’s discouraging is that lobbyists bribe politicians whose staff quietly write loopholes into the tax code (of which there are 50,589 restrictions) that result in companies like Amazon (ranked no. 8 in Fortune 100) paying zero federal taxes despite earning $11.2 billion in profits last year.

Crypto Tax Preparation: The Antithesis of Decentralization

Crypto investors must possess extremely detailed records of all purchases, sales, trades, and exchanges — including “fork” income and airdrops (of which law and guidance are lacking) — that occurred last year, Pat Larsen, CEO of crypto-tax software ZenLedger, tells CCN.

“Cryptocurrency is one of the most complicated areas of tax law. Users must track their activities for tax purposes, therefore it helps to have accurate documentation of your token portfolio.”

In an April 3 webinar, Larsen was joined by Andrew Gordon, a certified public accountant (CPA) and tax attorney who specializes in cryptocurrencies. The gentlemen identified common scenarios that are taxable. These include:

  • Sale of crypto to fiat
  • Sale of crypto for another crypto
  • Exchange of crypto for an item or service (capital gains)
  • Mining (ordinary income and capital gains)
  • Fork income and airdrops
  • Crypto-denominated compensation

However, the following are non-taxable events: the purchase of crypto with fiat; transferring coins between wallets; and gifting up to $10,000 equivalent per recipient. Users can also gain tax benefits when funding tax-favored IRA accounts.

If you track your portfolio using CryptoCompare or LiveCoinWatch, that’s a good start.

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