CryptoTaxes – What you need to know about taxes on Bitcoin & Cryptocurrency

Nothing is certain but death and taxes. So I’ll start off by answering the elephant in the room… “Do I have to pay taxes on cryptocurrency trades?

Yes (probably).

If you sold any cryptocurrencies, and sold at a profit, then this is considered a taxable event by the IRS and most government taxation agencies. Buying “stuff” with Bitcoins, such as video games, exotic cars, or even other cryptocurrencies, is treated by the IRS as the sale of property, and not as an exchange of currencies. The benefits extended to traditional “forex” foreign money exchanges do not apply. As the IRS considers Bitcoin and other cryptocurrencies to be property, and not “currency” – which brings us to…

How long has the US government been taxing Bitcoin?

2014… in theory.

The IRS made it’s first formal statement on the matter of “virtual currency” in 2014. In their report, they mention Bitcoin by name, and classify virtual currencies as “Property” for taxation purposes.

In reality, very few people paid taxes on Crypto-gains until the past year. They estimate that fewer than 1000 people paid taxes on cryptocurrencies in past years (802 to be exact). This will likely change as Bitcoin now holds both greater public awareness and a much higher level of scrutiny by the IRS.

How can I avoid paying taxes on Cryptocurrency?

There are two (three?) common methods:

HODL – Buy & hold. The word, “HODL” is a slang term within the cryptocurrency world for long-term investors who buy and hold cryptocurrencies. It’s relevant here because many cryptocurrency owners, be it people who purchased cryptocurrency or who were given it as a gift, have yet to sell. If you bought Bitcoins for pennies back in 2011, and never got around to selling any, you are likely immune from any tax liabilities. Just hire a good accountant when you trade your Bitcoin for a Lambo.

Only take losses – Wear your string of “bad luck” with pride! If you failed to make any profit from your alt-coin day trading, it is likely that you don’t owe any money. Just like that time you short-sold a house for a 100k loss following the housing bubble burst, or investment in stock you held until the day it was delisted (their sock puppet was cute). The good news is that your tax bill won’t be so high.

Hide your money from the IRS – If you want to feel like a modern day gangster, do what you can to hide your Crypto-earnings from the IRS. Before you ask, yes, this is illegal. Also note that most popular cryptocurrency exchanges, such as Coinbase, are subject to audits by the IRS. And Coinbase, in November 2017 (a time when Bitcoin was experiencing record numbers in price and trading volume), willingly turned over reports to the IRS on 14,355 of their users. With the boom in both price and popularity of Bitcoin and other cryptocurrencies in the past year, it’s unlikely that the IRS will let such transactions slide.

What if my accountant says I shouldn’t worry…?

Have you sold any cryptocurrency for a profit in the past year?

If so, I wouldn’t “worry” – but I’d likely seek out an accountant familiar with such issues. While there is much confusion over the extent to which cryptocurrencies may be taxed, it’s clear that the US (and most governments) treat any sale of cryptocurrency as a taxable event. With greatly increased enforcement efforts to tax cryptocurrency profits, it seems like the IRS has a different opinion than that of your accountant.

But I thought it was anonymous!

It’s not.

The nature of Bitcoin, and of most cryptocurrencies, is complete transparency. Any sale or exchange of cryptocurrency is tracked, publicly, along the blockchain. And for most cryptocurrency holders, significant information was required to set up accounts with Coinbase, Binance, and other popular cryptocurrency exchanges. And this information, including the name, address, and tax id of the account holder, can be given to the IRS upon request.

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Serial entrepreneur & experienced investor. 25 years of professional expertise. Specialties: Business Strategy, Investment Banking, Business Valuations, IP & Patent Valuations, Technical Marketing

Mindfully Upset

No, the title of this article is not a mistake. It is possible to feel upset – or a range of other emotions – and yet remain mindful, just the same. The working world can sometimes leave us feeling unhappy, defensive, blue, or otherwise in low spirits. We don’t have to automatically discount those emotions, nor do we have to pretend that we don’t feel the way we do.

It is said that our true potential is best demonstrated by what we do when we are required to handle difficult situations or people. When feeling upset, we might do any number of perfectly understandable things. We may lash out…choose to give up…or react with anger.

There is an alternative. It’s possible to be mindful while dealing with unwanted emotions. Here are the steps involved:

1. We can start by acknowledging that we feel bad. We have a tendency not to want to feel unpleasant emotions. We are taught that “big boys and girls don’t cry”, or that we should just “suck it up, buttercup”. While we do have to sometimes carry on in the face of whatever is going on, there’s nothing wrong with recognizing that we are feeling something we don’t want to feel.

2. Next, name that feeling. Is it sadness, confusion, disappointment, frustration…? This might be harder to do than it seems. After years of pushing our emotions aside, as we are taught to do, we may have become somewhat disengaged with them. Take a minute or two to wait this out. Sit with the slight discomfort of actually FEELING something, in order to name it.

3. Once we name it, we can be mindful about our emotion. We can silently repeat a mantra of “I am feeling (blank).” This mantra isn’t a judgment. It’s just a statement of fact. It’s a deliberate way to accept the emotion, without reacting in a rash way, or compounding negative feelings with self-blame.

4. After naming the emotion, we can check in with the body, to see where we can physically sense it, and exactly what it feels like. Does this feeling create a heaviness, a burning sensation, a tension, or something else? We can listen to the interior monologue of what the emotion is telling us.

5. As time permits, we can spend a little while sitting in silence, and waiting to hear what the emotion has to say. This can often yield a surprising bit of information. A quietly mindful approach to emotions and feelings can provide us with a successful tool to receive whatever message needs to be transmitted.
It may also be that, given a few moments for mindful reflection, we can recognize the baseline reasons why we have this feeling. It may be other than what we have initially thought was the cause.

6. Once we’ve finished being mindful of the emotion, we can take several deep breaths. When possible, we can journal anything that arises from this mindfulness exercise.
These steps don’t need to take too long to fit into your workday, and can be immensely helpful in terms of self- awareness, regulating your reactions, and staying present. All of these skills can make us better co-workers, managers, or leaders.

Don’t Be A Freelancer

Here’s my list of the top three most disposable things in an office.

1) Last week’s leftovers in the fridge
2) Loose staples
3) Freelancers

It doesn’t matter if you’re a writer, designer, or programmer. You’re there because you’re cheaper than a full time employee. You’re also easily replaceable by some other freelancer.

The upshot of it is, because you are completely dispensable, it’s easy to get bullied into accepting less than you think you’re worth.

Now, let’s flip it around, because here is my list of three most indispensable things in a business.

1) Today’s lunch
2) Great team
3) Trusted partners/vendors

That’s right. When businesses find the right partners and vendors, it allows them to focus on growing their business, while the vendors and partners play a critical supporting role.

So here comes the million dollar question. What’s the difference between a freelancer and a trusted partner?

What Are You?

A few weeks ago I ran a completely unscientific survey asking people in my Freelance Writers Facebook group if they considered themselves freelancers or B2B service providers. For those who responded, there were follow-up questions about rates and income.

By and large, this is a group that creates marketing content for business clients. They aren’t writing magazine articles for Atlantic Monthly, or proofreading academic papers for individuals.

I expected that people who viewed themselves as B2B service providers would have higher hourly rates and incomes than freelancers. What I didn’t expect was the of the 23 people who responded, only 2 (plus me) viewed themselves as service providers. 92% of my respondents viewed themselves as freelancers.

Clearly, there wasn’t enough data to compare income levels between the two groups, but it was telling that so many freelancers never really stopped to consider the job they do within the business ecosystem.

Simply put, they are a business, even if they are a one-man show. Their clients are businesses. They provide a writing service. By definition, they are business-to-business service providers. But they’ve told themselves they are freelancers.

Becoming a B2B Service Provider

So how do you break out of the freelancer mold, and become the valued service provider your clients can’t live without? Here are a few steps to get you started.

Change Your Mindset – The biggest thing holding you back is probably the idea that you are a freelancer. Until you understand and internalize that you are providing valuable services to your customers, your customers won’t understand it either.

Change Your View of the Project – Stop looking at freelance projects as standalone pieces. Find out where the project stands in your client’s scope of work, and see how you can expand into larger areas of the project. This might mean contributing something outside the scope of your engagement, but if you do it, you’ll find your client starts to look at you differently. And you could find yourself brought into other areas of the project.

Market Yourself Like a Company – This doesn’t mean go beyond your budget, but it does mean stop using generic URLs like, and start promoting yourself as a business. Invest in a URL, website, and logo. Write quality blogs, and create infographics or brochures (or go to Fiver and hire someone to do it for you) for your marketing efforts.