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Sunday, March 4, 2018
Bitcoin billionaire? Don't forget the taxes
Cryptocurrencies like bit-
coin may not be regulated
by the government, but
they're still subject to
There have been vari-
ous forms of digital currencies around
for years, but several have taken off
in popularity recently. And that may
leave some newcomers to this market-
place unaware that they face taxation
on their dealings.
The IRS says that cryptocurrency
transactions are taxable by law. That
means people who made money (or
lost it) on bitcoin trades, "mined"
ethereum or even bought a cup of cof-
fee with digital currency face potential
tax implications. Failure to report it
could mean potential audits, ines and
There are also people who may be
upset to ind that cryptocurrencies,
which are not linked to a government
or central bank, aren't as off-the-grid as
they hoped. Part of their appeal is that
it could be used as a new, more anon-
ymous kind of currency that operates
outside the traditional banking system
and government oversight.
"There's a very strong sentiment
that taxing cryptocurrency is sort of
sacrilegious," said Tyson Cross, a tax
attorney in Reno, Nevada who spe-
cializes in this niche. "But most peo-
ple understand there is a difference
between upholding a principle on an
anonymous internet forum and going
to jail over it."
The IRS didn't weigh in on how to
tax digital currency until 2014 and that
remains its only guidance to date. We
spoke to a few experts to help break
down the basics:
Wait, I owe taxes in this?
Yes, most likely.
All digital currency transactions are
taxable events, according to the IRS.
That includes if you sell it, trade it,
"mine" it, use it to pay for something
or were paid with it. Even if you sell
cryptocurrency and keep the gains in
your exchange account, instead of as
real cash in chequeing account, it's still
Bought some bitcoin but still hold-
ing on to it? Relax, you don't owe any
taxes yet. But any time the digital cur-
rency's value was "realized," you need
to report it.
How it is taxed depends on how you
used it, said Lisa Greene Lewis, a CPA
and tax expert at TurboTax.
Another key thing to remember is
that these digital currencies are taxed
as property, instead of currency, for
tax reasons. That means the same
rules apply if you sell bitcoin as if you
Keep good records.
It's tough to igure out the value of
some of these transactions. There is
software out there to help you igure
out your capital gains and losses for
digital currencies, such as bitcoin.tax
and cointracking.info. You can also
seek out a tax professional or other
expert who has some experience in
And "be deliberate about when to
make crypto trades" says Cross. It's
very easy to get caught up in the next
trade without realizing how it's calcu-
lated. You could be racking up consid-
erable capital gains without realizing it.
Don't write off paper bank statements just yet
Electronic bank statements
have virtues --- saving
trees, keeping your desk
uncluttered --- but they
also have a vice: They can
be easy to forget.
You could instead get paper state-
ments delivered by mail, an option
that's becoming less popular as tech-
nolo y gets better.
But Nessa Feddis, senior vice pres-
ident for consumer protection and
payments at the American Bankers As-
sociation, says they "won't disappear
Whatever form they take, these
monthly records help you spot fraud-
ulent purchases and errors and, in the
case of bills, remind you of payment
Here's what you can expect from
bank statements in the future and how
to decide whether sticking with paper
makes sense for you.
A more digital future
Bank statements played a key role
when balancing a checkbook was
common. You would keep track of de-
posits and withdrawals on paper and
compare your numbers each month
with your statement.
One perk to using paper is being
able to mark it up.
But, just as cheques gave way to
debit cards, paper bank statements are
being replaced by electronic ones and
other technolo y.
"Instead of a formal document at
the end of the month, it's a rolling,
continuous spending tracker," Cole
Kennedy, a copywriter in New York
City, says of his bank's tracking feature.
His bank also provides graphs of his
Many banks have tools such as mo-
bile alerts to help prevent fraud, and
someday digital banking might affect
paper statements too.
"We're not going to snap our in-
gers and stop sending paper" to peo-
ple who want it, says Rob Krugman
, chief digital of icer at Broadridge,
a customer communication and an-
alytics irm that delivers inancial
statements on behalf of thousands of
brands. "But there's an opportunity
to make the paper and the digital
For example, he says, a one-page
statement could have an integrated
chip in the paper, which you could
scan with a smartphone to see more
Going paperless' isn't
Banks have encouraged customers
to opt into electronic statements, or "go
paperless," for over a decade, and the
push continues; a quarter of banks now
charge a fee to send a paper statement,
according to 2014 data from banking an-
alytics irm Novantas.
About 61 per cent of chequeing ac-
count customers only receive electronic
statements, according to a 2017 survey
by Javelin Strate y and Research.
But some people don't bene it from
e-statements. About a third of US house-
holds don't have access to broadband,
or high-speed, internet at home, accord-
ing to a 2015 study by the Pew Research
Banks, by law, have to make paper
statements available as an option. They
can't assume everyone has internet ac-
cess. Accessing a statement online at a
library or other public place might not
be as secure as accessing it through your
home network. Plus, having a smart-
phone might not be enough.
It's "very different seeing a bank state-
ment on a full sheet of paper (rather)
than a small screen," says Chi Chi Wu,
staff attorney at the National Consumer
Law Centre. Certain transactions and
bill deadlines on credit card statements
might get overlooked and lead to missed
Why some prefer paper
Even people who can easily receive
statements online may prefer paper for
° To cut through information overload
online. Emails about statements can get
overlooked in a crowded inbox, and
checking e-statements usually requires
logging onto online or mobile banking
and downloading a PDF.
"Clients who have paper statements
check them at least once," says Dana
Twight, certi ied inancial planner and
owner of Twight Financial in Seattle. "It
comes in the mail and they see it."
In contrast, Twight adds, her clients
with e-statements don't read them, ex-
cept maybe around tax time.
° To keep a more permanent record.
Computers crash and iles get lost, so
storing statements digitally isn't fool-
proof. Although paper takes up space,
having a copy at hand can be more reas-
suring than one in cyberspace.
° To make it easy for family to ind,
if necessary. If an older person can no
longer manage their inances, relatives
might need to step in. Finding paper
statements might be easier than track-
ing down bank website passwords.
Save your statement
Tax audits, lawsuits and other situ-
ations may require a bank statement.
Storing paper in a safe place is intuitive,
but e-statements should be saved offline
too, either printed out or saved on your
computer. Some banks keep them avail-
able online for up to seven years.
Whatever the future may hold for
statements---paper or digital---they're
important inancial records.
This photo shows a paper bank statement. Bank statements played a key role when balancing a chequebook was
common. But, just as cheques gave way to debit cards, paper bank statements are being replaced by electronic ones
and other technology.
PICTURE JENNY KANE
Coins are displayed next to a Bitcoin ATM on Hong Kong.PICTURE KIN CHEUNG
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