Tax Treatment of Cryptocurrency Losses Suffered by Individual Taxpayers

Investments in bitcoin and other cryptocurrencies are extremely volatile and highly risky, which can result in high gains or substantial losses for taxpayers. Tax advisers for clients with cryptocurrency holdings must understand the reporting requirements for exchange transactions, the calculation of gains and losses, and any available deductions within the confines of U.S. tax law.

Cryptocurrency is digital currency using encryption techniques rather than a central bank to generate, exchange, and transfer units of currency. Investors may use "mining operations" and purchase, receive payment, or transfer crypto units to and from another user with no bank or government authority verifying the transfer of funds. There is a high volume of fraud, scams, exchange shutdowns, and bankruptcies that have driven taxpayers to consider a variety of tax reporting options and planning techniques.

Initial IRS guidance on cryptocurrency (IR 2014-36) treated all virtual currency as property rather than money for U.S. tax purposes. Any transaction involving cryptocurrency must be reported as a sale or exchange of ownership, with the taxpayer bearing responsibility for calculating and maintaining basis in their virtual currency holdings. However, there is minimal guidance regarding the reporting obligations and available methods for losses stemming from victims of fraud, scams, crypto exchange shutdowns, and bankruptcies.

Listen as our panel discusses key rules applicable to cryptocurrency taxation and reporting, tax issues stemming from crypto exchange shutdown, bankruptcy and scams, and offers tax planning considerations and techniques for investors in bitcoin and other cryptocurrencies.

1. Taxation of bitcoin and other cryptocurrencies
2. Tax issues after crypto exchange shutdown, bankruptcy, and scams
3. Tax deductions and other options
   1. Personal casualty loss deduction
   2. Bankrupt financial institution deduction
   3. Capital loss deduction
4. Best practices and planning techniques for cryptocurrency investors

The panel will review these and other essential issues:

• What are the principal tax rules impacting investors and holders of bitcoin and other cryptocurrencies?
• What are the reporting and compliance obligations for U.S. individual taxpayers?
• What issues arise after a crypto exchange shutdown, bankruptcy, or scam?
• What tax reporting options and deductions are available to taxpayers?
• What are the best practices and planning techniques available to cryptocurrency investors?

Learning Objectives

After completing this course, you will be able to:

• Identify critical tax rules impacting investors and holders of bitcoin and other cryptocurrencies
• Determine the reporting and compliance obligations for U.S. individual taxpayers for cryptocurrency transactions
• Recognize tax reporting options and deductions for bitcoin and cryptocurrency losses
• Ascertain essential tax planning techniques available to taxpayers with cryptocurrency investments

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing income tax forms and schedules at mid-level within the organization, supervising other preparers/accountants. Specific knowledge and understanding of sale and exchange transactions; familiarity with virtual currency structures, foreign information reporting requirements.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).