Crypto Tax Chaos
CryptoMondays Philly - Episode 02 pt.01
Crypto Tax Changes Are Here: What You Need to Know from Crypto Mondays Philly Episode 02
What’s up, crypto crew? Crypto Mondays Philly just wrapped up Episode 02, and let me tell you—it was packed with valuable info that every crypto user needs to hear. Kirk, a tax whiz with years of experience in the Web3 space, walked us through some major changes coming to crypto taxes. Let’s break it down so you can stay ahead of the game (and the IRS).
Out with the Old, In with the New
Starting January 1, 2025, the IRS is saying goodbye to the universal basis method for calculating crypto taxes. In simple terms, you used to be able to throw all your transactions from different wallets and exchanges into one big pot and call it a day. Not anymore.
Now, you’ll need to calculate cost basis separately for each wallet and each account. Yeah, it’s a lot more work, especially if you’re juggling a bunch of wallets. But this new system is here to stay, so let’s talk about what you need to do to make your life easier.
What’s This “One-Time Allocation” Thing?
Here’s the deal: Before the clock strikes midnight on December 31, 2024, you need to do a one-time cost basis allocation.
What does that mean?
Every crypto asset, every wallet. You’ve got to figure out the cost basis for each token in each wallet or account.
Keep your dates straight. Original acquisition dates matter because they determine whether your gains are short-term or long-term.
Pick your method: Go personalized with specific unit allocation or stick to a standardized global allocation.
If you do this, you’ll qualify for a safe harbor, which basically means the IRS can’t come after you with penalties, recalculations, or audits (at least for this).
How to Make This Easy (or Easier, Anyway)
Kirk shared a few smart strategies to keep your sanity intact:
Cleanse Your Basis:
Got crypto on centralized exchanges? Pull it out before the year ends and reintroduce it later. This resets your cost basis to zero, which is easier to explain if the IRS comes knocking.Consolidate, Consolidate, Consolidate:
If you’re juggling 37 wallets (lookin’ at you, Bob), it’s time to slim down. Fewer wallets mean fewer headaches when it’s time to calculate your cost basis.Unstake Early:
If you’ve got assets locked in staking or liquidity pools, unbond them now. Some assets have waiting periods that could run past year-end, and you don’t want to miss the deadline.
Why Should You Care?
You might be thinking, “Why should I bother? The IRS won’t notice me.” Think again. If you skip the allocation, you’ll still have to do it later—and without the safe harbor protection, you could end up with penalties, recalculations, or even a nasty audit.
Plus, if you’ve got low-basis assets like early Bitcoin or ETH from way back when, skipping this could mean a massive tax bill. Don’t risk it.
Take Action and Stay Informed
If you’re feeling overwhelmed, don’t worry—there are resources out there to help. Kirk recommended checking out his blog posts, which cover topics like “How the IRS Tripled Your Tax Prep Costs” and “The Nightmare of Digital Asset Broker Regulations.” He’s also got a cool platform called Crypto Bullseye Zone that focuses on crypto risk, security, and scam prevention.
Final Thoughts
The new rules might feel like a pain, but with a little planning, you can tackle them without breaking a sweat. Get your wallets in order, allocate your basis, and start 2025 on the right foot.
Crypto Mondays Philly is all about keeping the community informed and connected, so keep an eye out for future events. Whether you’re deep in DeFi or just hodling for the long haul, we’ve got your back.
Got questions? Need resources? Reach out. Let’s navigate this wild Web3 world together. 🚀
For more information, visit www.CoinFlask.net/CryptoMondays-Philly
DISCLAIMER: The views and opinions expressed are those of the authors and do not necessarily reflect the official policy or position of CoinFlask. Do your own research. This is not financial advice.