With Turkey’s leftovers, title game wins and betrayal, another “T-word” emerges — TAXES! b) come back to offer sage advice. flow. “
Cryptocurrency TV ads and other promotions put me in FOMO (fear of missing out) mode. So I bought bitcoin earlier this year. We currently have a loss of about $7,000. Can you provide income tax advice to mitigate the impact of these losses?
— SCC, email
Our grandparents were right when they told us that nothing too good to be true is probably not going to happen. rice field. A few weeks ago he said the cryptocurrency market collapsed when FTX declared bankruptcy.
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The Internal Revenue Service treats cryptocurrencies as capital assets. Long-term capital gains may qualify for preferential tax rates, so good news if profits are reported. In general, capital losses can only offset capital gains for the year. If there is a “winner” in the stock portfolio, we recommend that he start generating capital gains between now and the end of 2022.
You have a $7,000 loss that can offset your capital gains. The Internal Revenue Code provides some relief when there are no or insufficient assets to generate capital gains. In other words, the rule that capital losses can only be deducted against capital gains provides some “fine-tuning room” for individual taxpayers who are eligible to deduct up to $3,000 annually in capital losses in excess of capital gains. increase. If he does not accrue any capital gains between now and December 31st, he can offset $3,000 of his regular income on his 2022 tax returns. The remaining $4,000 of her can be carried forward to 2023 and offset by capital gains or another he can $3,000 of other income. Best-case scenario for you — sell the capital gains assets in your portfolio by the end of the year (or the kickoff of the Gator Bowl). A maximum of $7,000 of these profits would result in $0 capital activity in 2022. Worst case scenario — with no capital gains, $3,000 is written off in 2022, $4,000 is carried forward to offset future capital gains, and 2023 recurring income is his $3,000.
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The above advice regarding cryptocurrency losses also applies to other individual capital loss situations, such as the sale of stocks and/or other assets held as investments. In other words, capital losses offsetting capital gains can reduce a person’s taxable income by up to $3,000/year.
Ken & Klee’s Income Tax Bulletin Board
Since 2015, the IRS, state tax administrators, tax software and the tax professional community have worked together to strengthen defenses and protect people from tax-related identity theft. The IRS specifically warned taxpayers of the recent increase in her IRS-themed text scams aimed at gaining access to personal and financial information. In 2022, the IRS identified and reported thousands of fraudulent domains associated with multiple MMS/SMS/text scams targeting taxpayers called “smishing.” Attempts at “smishing” target mobile phone users, and scam messages often appear to come from her IRS. Lures include fake coronavirus relief, tax credits, or help setting up an online account with the IRS. Recipients of these her IRS related scams should report to phishing@irs.gov and do not respond to these deceptive tactics.
While we’re at it, here’s some non-income tax advice from the IRS. I never have Buy anything from gift cards, money transfers through companies like Western Union or MoneyGram, or online merchants that only accept payments in cryptocurrencies. Tracking down and reversing these payments is nearly impossible.
Rick Klee served as Tax Director at the University of Notre Dame from 1998 to August 2019. His retired CPA, Klee, is a graduate of the University of Notre Dame. You can contact him at rklee@nd.edu.
Ken Milani is Professor of Accounting at the University of Notre Dame and was the Faculty Coordinator for the Notre Dame Tax Assistance Program. Please contact milani.1@nd.edu. Email any questions to either.
