Beyond the Numbers: Tax Considerations When Investing in Crypto
Two terms many people are familiar with these days are crypto and blockchain. However, the familiarity does not always translate into understanding. There are plenty of questions about cryptocurrency and blockchain, so Weaver’s Beyond the Numbers reached out to Tim Savage, who oversees tax services for Weaver’s Cryptocurrency Task Force, to help answer those questions….
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Two terms many people are familiar with these days are crypto and blockchain. However, the familiarity does not always translate into understanding. There are plenty of questions about cryptocurrency and blockchain, so Weaver’s Beyond the Numbers reached out to Tim Savage, who oversees tax services for Weaver’s Cryptocurrency Task Force, to help answer those questions. Savage is in the process of building Weaver’s blockchain and digital assets division.
There are two sides to the “crypto coin.” There is the investment side of crypto that brings its own set of risks and potential rewards. This is the side of crypto that most people understand. However, the innovative blockchain technology that powers crypto ecosystems is what fascinates Savage.
“The technology is going to revolutionize existing business models.” Savage said. “I think it will help evolve our financial services sectors initially, and then it will extend to every area where rights to goods or property are necessary. Essentially, property rights are fundamental wherever money is involved, so that is an incredibly broad scope. That’s what excites me, how this technology is going to make our world a lot more efficient both in terms of cost and effort.”
Today the IRS doesn’t have a lot of guidance around cryptocurrency, or as they call it, digital assets or virtual currency. While the buying and selling of digital assets have capital gains implications like stocks, the process of buying and selling crypto isn’t the same. This difference makes accounting for large volumes of crypto transactions more difficult than maintaining financial records for stock transactions. A further challenge is presented when cryptocurrency is used as a form of payment or when participating in mining or decentralized finance. For those with a more complex set of crypto transactions, consulting with a professional tax advisor is highly recommended.
For more information or to discuss the tax, accounting, internal controls and cybersecurity considerations around cryptocurrencies, visit Weaver’s Cryptocurrency Task Force Resources or contact us.
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