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How to Calculate Crypto Income Tax: 2024 IRS Rules

Did you sell or exchange any cryptocurrency during 2023? If so, you must disclose this information when you file your personal taxes this year, and you must pay cryptocurrency taxes. Federal tax Forms 1040 and 1040-SR specifically ask whether you sold, received, sent, exchanged, or otherwise gained any financial interest in a virtual currency at any time. The form requires you to check “Yes” or “No.”

Depending on your crypto income and filing status, you’ll generally either pay 0%, 15%, or 20% on your long-term gains. The 0% long-term capital gains tax rate applies if your taxable income is $0 to $44,625 (single filers) or $0 to $89,250 (married filing jointly).

There’s no avoiding this disclosure or payment of associated taxes—regardless of whether you receive a 1099-K, 1099-B, or 1099-MISC from a crypto exchange. Take the necessary steps to ensure you aren’t paying too little or too much. Start by reviewing how the IRS defines and taxes cryptocurrency.

How the IRS Defines Cryptocurrency 🪙

For federal tax purposes, digital assets are treated as property. General tax principles applicable to property transactions apply to transactions using digital assets. You may be required to report your digital asset activity on your tax return. For more information on the tax treatment of property transactions, see Publication 544, Sales and Other Dispositions of Assets.

❓ How the IRS Taxes Cryptocurrency

You’re required to pay taxes on crypto. Taxes are due when you sell, trade, or dispose of cryptocurrency in any way and recognize a gain. For example, if you buy \$1,000 of crypto and sell it later for \$1,500, you would need to report and pay taxes on the profit of \$500. If you dispose of cryptocurrency and recognize a loss, you can deduct that from your taxes.

Buying crypto on its own isn’t a taxable event. You can buy and hold cryptocurrency without any taxes, even if the value increases. There needs to be a taxable event first, such as selling cryptocurrency.

Cryptocurrency Capital Gains📈 & Losses 📉

To the IRS, your cryptocurrency properties are capital assets. The IRS taxes any profit you make when you sell your Ethereum, Bitcoin, or another cryptocurrency. This includes purchases you make with your virtual currency if the value exceeds the amount you paid initially. Essentially, the IRS says if you’re selling your cryptocurrency at a profit—the goods or services you receive are merely an exchange for the convertible virtual currency.

Both your annual income and the length of time you’ve held your virtual currency affect your capital gains tax rate. If you’ve held your cryptocurrency for less than one year, it is a short-term gain and you will pay taxes at your normal rate. However, if you’ve held it for more than a year and your income meets eligibility requirements, you may pay a lower rate on your long-term capital gain.

Alternatively, your cryptocurrency may have lost value. If that’s the case, you suffer a capital loss when you exchange it for less than you paid for it. This loss may help reduce any personal taxes you owe.

Cryptocurreny Income 💸

When you mine cryptocurrency or receive it as payments, perks, or bonuses for work you’ve performed or goods you’ve sold, it’s treated as taxable income. The amount is equal to the market rate value on the date you received it. You pay the same tax rate you would on your other income. If you then sell or otherwise transfer that cryptocurrency at a profit, you’ll owe capital gains on that increased value.

⚠️ Avoid Overpaying or Underpaying Crypto Income Taxes

Keep detailed records of all your cryptocurrency transactions. This will make things easier when it comes time to pay your personal taxes. There are excellent software tools that can help you stay on top of these record-keeping tasks. Remember that you are likely to pay a lower tax rate on long-term capital gains, so it may be smart to hold on to your cryptocurrency for at least 12 months. Offsetting gains with losses is another viable option.

If you’ve invested in or otherwise received cryptocurrency, contact Insogna CPA to ensure that you’re not over or underpaying your taxes. We also recommend using advanced software tools to combine your virtual wallets for IRS tax reporting.

Stay ahead of the crypto game!

Ensure your crypto income tax is handled correctly. Contact us today to schedule a consultation with a tax advisor. Let us help you navigate the complexities of quarterly tax filing and optimize your cryptocurrency tax strategy.

Discover 5 Tax Credits Every Small Business Owner Can Claim in 2024

Running a business comes with many financial responsibilities, and paying taxes is a significant one. While it might seem like a hefty expense, with a proper tax strategy, it can also be one of the best ways to save money. Knowing which tax credits your small business can claim could be a game-changer.

A licensed, Certified Public Accountant (CPA) can help you find legal ways to reduce the amount you pay in taxes each year, often through tax credits. Tax credits allow businesses to subtract a certain amount of money from the income taxes they owe.Especially in times of economic uncertainty, tax credits for small businesses are crucial.

Here are five tax credits your small business can claim this year:

1. Paid Family and Medical Leave Credit

This credit encourages small businesses to offer paid leave for reasons like the birth of a child or a family health emergency. Business owners must have a written policy that meets IRS requirements. They can then claim a credit based on the percentage of wages paid to employees on leave. The credit amount is calculated according to IRS guidelines on Form 8994.

2. Alternative Fuel and Motor Vehicle Credits

Businesses involved in the production or use of alternative fuels can claim this credit. It supports the shift from imported oil to other fuels. If your business qualifies, you can claim refunds for alcohol, biodiesel, renewable diesel, or alternative fuels. Additionally, businesses can claim up to $8,000 for purchasing alternative fuel vehicles, excluding electric and hybrid ones.

3. Disabled Access Credit

Making your business accessible to individuals with disabilities can be costly, but it brings benefits. Small businesses with fewer than 30 employees or less than \$1 million in annual revenue can claim up to 50% of the costs for disabled access. This incentive not only helps accommodate a wider range of customers but also enhances company culture and reputation.

4. Empowerment Zone and Renewal Community Employment Credit

If you hire employees living in low-income areas, you could be eligible for this credit. It encourages businesses to hire from empowerment zones, offering a credit of up to 20% of the first \$15,000 in wages paid to qualifying employees. This credit aims to diversify staff and support community development.

5. New Markets Credit

This credit rewards businesses for investing in community development enterprises (CDEs) and community development financial institutions (CDFIs). If your business invests in organizations that support low-income communities, you can claim tax credits. Projects must be in areas with a 20% poverty rate to qualify. Use Form 8874 to apply and ensure you benefit as much as possible.

These tax credits can significantly boost your business’s savings. Review your possible tax credits annually, as your eligibility might change. A CPA can help you prepare and implement a tax strategy to maximize your tax credits and save your business as much money as possible.

Curious about how these tax credits can benefit your business? Call us today and let’s chat about crafting a tax strategy that fits your unique needs.

2024 Legal Tax Tips: 5 Ways to Reduce Your Tax Bill

Tax bills can be stressful, and it may be tempting to procrastinate—don’t give in to that temptation. By thinking ahead and working with an expert, you can turn the hassle of doing your taxes into an opportunity to keep some of your hard-earned income in your pocket where it belongs. Tax professionals – like the experts at Insogna CPA – can help you minimize your taxes as much as legally possible.

Here are 5 smart ways you can reduce your tax bill this year:

1. Contribute To A Pre-Tax Retirement Account

Contributions to retirement accounts like the traditional 401(k) and IRA are some of the simplest ways to reduce your tax bill. These contributions are deducted from your taxable income, reducing the overall amount of federal tax you owe. Plus, if you maximize any available employer-matching options, you’re making a serious investment in your future with those tax-deferred dollars.

2. Claim Your Business Deductions

If you own your business, there are many tax deductions available to you. Leaving these deductions unclaimed is like leaving money on the table. You might be surprised at what you can deduct—utilities, wages, employee benefit programs, and advertising are all options. Work with your advisor to ensure you have taken advantage of every deduction you are eligible to claim.

3. Check for Earned Income Tax Credit (EITC) Eligibility

The Earned Income Tax Credit is a benefit for those with lower or moderate income and may reduce the amount of tax you owe—especially for families with children. The exact amount varies based on your income, marital status, and number of children, but if you qualify, you could see a significant reduction in your tax bill, and in some cases, an increased refund. Check to see if you qualify.

4. Charitable Contributions

Another popular way to reduce your tax bill is to donate to recognized charities. Depending on the amount you donate, you’ll need to demonstrate proof of your charitable donation with either a receipt or a written acknowledgment from the organization. Despite the hassle of record-keeping, these donations can add up and save you a bundle come tax time.

5. Collaborate With A Tax Professional

For complex tax returns, there’s no substitute for working with a professional. Free software can help if your taxes are simple, but if you own a business, are self-employed, or have significant assets, you’ll want an expert’s help. A qualified tax professional like a CPA will stay up to date with changing tax laws and help you make the most of your income, assets, and overall financial situation.

Let’s Cut That Tax Bill Together!

This list isn’t exhaustive, but it gives you an idea of what’s possible. Partnering with an experienced CPA firm like Insogna CPA means working hand-in-hand to legally minimize your taxes. Don’t wait around—waiting too long risks leaving money on the table or incurring penalties from the IRS.

Ready to save? Contact us today and let’s get started!

What is the NEW FinCEN’s Reporting Rule: Things Your LLC/INC Needs to Know

Hey there, business owners!

Your friendly Insogna CPA team here, bringing you the latest on FinCEN’s new rule that’s set to impact your business.

This isn’t just another update; it’s a crucial federal requirement for your LLC or INC. Miss it, and you could face some serious penalties!

So, let’s break it down…

⭐ The Star of the Show - FinCEN’s Reporting Rule

Starting January 1, 2024, FinCEN’s Beneficial Ownership Information Reporting Rule comes into effect. This rule ensures transparency in business ownership by requiring companies to report key information to the U.S. Government.

Think of it like a guest list for an exclusive event – the government wants to know who the real power players are in your business.

Meet the VIPs

👉 Beneficial Owners: These are individuals owning or controlling at least 25% of your company or holding significant influence behind the scenes.
👉 Company Applicants: These are the folks who got your company up and running – the ones who handled the paperwork (like us at Insogna CPA, if we’re assisting you).

Key Dates - Mark Your Calendar

✅ Already in Business? If your company was established before January 1, 2024, your deadline is January 1, 2025, to file your first report.
✅ Starting Fresh? Companies formed on or after January 1, 2024, have a 30-day window post-registration to complete their reporting.

Who Needs to Report?

Not every company will be required to report. There’s a specific list of who must comply and who’s exempt. Check out the FinCEN guide to see if your company is on the list.

⚠️ Consequences of Missing the Deadline

This is serious. Missing your reporting deadline or providing false information can lead to hefty fines or even imprisonment. FinCEN isn’t messing around.

❓How to File Your Report

Starting January 1, 2024, all reports must be filed through FinCEN’s secure electronic system. They promise a smooth process (fingers crossed!).

Need More Info?

For all the details, visit www.fincen.gov/boi

Got Questions or Need Help Filing?

Hey, we get it – this stuff can be confusing and time-consuming. Don’t stress. At Insogna CPA, we’re here to guide you through every step.

Whether you need help filing or just have a few questions, give us a call. We’ll make sure your business stays compliant, so you can focus on what you do best. Let’s tackle this together!

Where’s my IRS tax refund? Reasons Why IRS Isn’t Responding

If you’re still waiting for a tax refund or have tried to contact the IRS directly in 2024, here are six reasons why you might not be getting a response.

Questions You Might Ask

Never got your refund?

There are still 8 million paper IRS tax refunds that haven’t been processed.

Wonder why the IRS hasn’t processed your return?

6 million IRS returns are in suspension status.

Why does it take so long?

With 1.3 million 1040 amended returns unprocessed, the IRS is taking over 20 weeks to respond.

Waiting on your Employer Retention Credit?

2.75 million 941 filings are still awaiting processing.

Responded to the IRS lately?

4.5 million pieces of correspondence are still in the queue.

Tried calling the IRS lately?

Only 10% of IRS phone calls are answered.

Don’t Like IRS Audits?

If you’re tired of the run-around or worried about an IRS audit due to delays, we can help you avoid them. Our expert team of 20 is here to assist you all year long.

Ready to stop the waiting game with the IRS? Contact us now, and let our experts handle it for you. Get your IRS tax refund issues resolved efficiently, avoid unnecessary IRS audits, and get through to IRS phone support.

Licensed CPA Accountant vs. Unlicensed Tax Preparer

Did you know: Anyone with a high school diploma can pay the IRS a small fee and become a “tax expert” filing your income taxes. Are you certain you want to leave your most intimate financial details to someone who has no recourse? You may pay more for a licensed CPA accountant firm, but ‘you get what you pay for.

Here’s a quick breakdown of the differences:

✅ Bachelor’s degree in accounting, plus 150 hours of college hours.

✅ On-the-job experience, signed off by another licensed CPA.

✅ Rigorous CPA exam, expanding 4 parts from financial to legal and tax.

✅ Required understanding of tax codes when preparing tax returns.

✅ Legally represent you before the IRS when issues arise.

✅ State Board recourse if you are not getting communication timely.

✅ Committed to ongoing professional development and ethical conduct.

❌ No formal education.

❌ No experience required to prepare taxes.

❌ No requirement of continuing education to keep up with changing tax laws

❌ Cannot represent you before the IRS.

❌ No ethical or professional oversight.

Investing in a Licensed CPA accountant is Investing in Your Success

Think of a CPA as your financial co-pilot, navigating the complexities of accounting, controller advisory, proactive tax strategies and annual tax preparation.

Engaging with a licensed CPA team of experts certifies your financial life is in great hands. Don’t wait until March to figure out what you should have tax planned for last year.

Contact our team today to get a top-ranked CPA on your team.