The crypto tax laws in the U.S. are exceedingly complicated. Nobody can deny this, and while there have been politicians and people in the past that have sought access to specific jobs in our government by saying they will make the laws easier to understand, it wasn’t enough to hit home with voters at the time or others tasked with making such decisions.
The Crypto Tax Situation for 2022 Isn’t Pretty
That being said, they’re likely feeling the heat right about now and wish they could go back and make things a little simpler for themselves by hiring people who could explain the rules to them, especially now that agencies like the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS) are looking deeper into crypto activity.
Terrence Yang – the managing director of Swan Bitcoin – commented in a recent interview:
Given that crypto does have a target on its back, make sure you collect documentation on sales and in crypto investments that went to zero, as many of them did last year when the bubble burst.
The IRS has been poised to go after crypto investors for some time, and one of the big problems is that those in power are giving them secret windows to do so. For example, in the summer of 2021, a new infrastructure bill was unveiled designed to target crypto investors even harder come 2024.
The word “infrastructure” would imply the bill was about rebuilding America’s hospitals, schools, roads, and other important sectors. Instead, it was just written so politicians could get a few more billion dollars out of crypto investors’ pockets.
2022 is going to be a particularly hard tax period for crypto fans given the high level of losses they all incurred. Bitcoin, for example, which had been trading for about $68,000 per unit just a few months before that year began, wound up ending 2022 at a measly $16,600. This means the currency lost more than 70 percent over the course of 365 days. Yang said:
A lot of us saw… unrealized losses in our bitcoin exposure because many of us bought during the bull market during the hype in 2021. You could sell immediately, rebuy, and lock in that tax benefit by realizing your capital loss.
Watch Your Back…
Most of the tax laws that apply to altcoins also clearly suggest they are securities. For this reason, Yang advises that people avoid too much non-bitcoin trading given the SEC could step on these assets anytime it chooses. He said:
In the past I would have said crypto [along with bitcoin] but given that the SEC and the IRS are taking a new and more aggressive look at and considering them securities, you actually can’t rebuy crypto immediately because you would violate the SEC’s 30-day wash sale rule.
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