Happy Accounting

Bitcoin: Claiming Taxes on Crypto Gains

Cannabis businesses face significant challenges when it comes to banking. While it’s not impossible for a cannabis operation to get a bank account, most banks balk at the idea of working with companies in the industry. As such, many dispensaries still operate as cash only. Due to difficulties when it comes to banking, some cannabis businesses have turned to cryptocurrencies such as Bitcoin. While they haven’t been adopted on a mass scale yet, there are some significant benefits. You’ll also want to keep a few things in mind — for example, Crypto might not require a bank, but you can get taxed come April 15.

If you use (or you’re considering using) Bitcoin for your cannabis business, here’s what you need to know about taxes on your crypto gains.

Every time you sell, trade, or dispose of your currency, you create what’s known as a taxable event

The IRS Treats Crypto as Property

The first thing you should know is that the IRS doesn’t treat crypto as money. Instead, it treats Bitcoin and other cryptocurrencies as property, and they’re taxed as such. Every time you sell, trade, or dispose of your currency, you create what’s known as a taxable event. Whether you sell it for cash or trade it for another coin, you’ll have to pay taxes on any gain you make. If you have the coins in a digital wallet, but you haven’t sold them or traded them, you have what’s known as an unrealized gain. These gains aren’t taxable.

Calculate Your Gains

To calculate your gains (or losses), you’ll first need to determine how much you made selling your crypto. Next, subtract how much you paid for it along with any fees you paid for selling it. The result leaves you with your realized gain — the figure the IRS taxes. Next, determine if your gains are short term or long term. If you held the cryptocurrency for less than a year, it’s a short-term gain. Holding crypto for more than a year turns it into a long-term gain. Knowing this information will help you to figure out your tax rate. The IRS taxes short-term gains as ordinary income. If you have longterm gains, you’ll have to pay a capital gains tax.

Fill Out IRS Form 8949

To report your crypto gains, you’ll need to complete IRS tax form 8949. The form requires you to provide the details of each of your transactions, including: A description of the property (the amount and type of coin) The dates you acquired and sold it Proceeds Adjustments (if any) Your gain (or loss) from the transaction Report the information for short-term gains in Section I of form 8949. Long-term gains get reported in Section II.

Once you have completed the form, you’ll enter the numbers in the appropriate section of your regular tax forms and complete your taxes.

Help for Filing Taxes When You Accept Crypto

Tax planning and preparation already present a challenge to cannabis and hemp businesses. If you accept cryptocurrency, things become more complex. Fortunately, an experienced accountant like My Cannabis Accountant is available to help to simplify the process.

www.mycannabisaccountant.com