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Cryptocurrency and Taxes: Gains & Losses

In the realm of digital finance, cryptocurrencies have surged from being an obscure and niche investment to becoming a significant part of the global financial ecosystem. Yet, as with most nascent technologies, regulatory clarity has been slow to catch up. One of the key areas still shrouded in question is taxation.

How Gains and Losses are Taxed

Let’s start by understanding the basics: cryptocurrency, in many jurisdictions, is treated as property for tax purposes, much like stocks or real estate.

1. Capital Gain: If you bought a cryptocurrency and sold it later at a higher price, the difference is termed a capital gain. This gain is what you’re taxed on. Depending on how long you held onto the cryptocurrency before selling, it can either be a short-term or long-term capital gain, each potentially having a different tax rate.

2. Capital Losses: Conversely, if you incur a loss after selling your cryptocurrency for less than you purchased it, you’ve incurred a capital loss. These losses can offset other capital gains and sometimes even reduce taxable income. Always consult a tax professional on how to best leverage these losses.

Taxing Crypto Trades

The notion that only converting crypto to fiat incurs taxes is a myth. In reality, trading one cryptocurrency for another is a taxable event in many jurisdictions. For instance, if you use Bitcoin to buy Ethereum, the IRS, and many other tax agencies, view this as selling Bitcoin for its fiat value and then buying Ethereum with that fiat.

Therefore, even if you didn’t convert your Bitcoin to USD (or your local currency) and directly traded it for Ethereum, you would still need to calculate and report any gains or losses from that trade.

Crypto Wallet Movements and Transactions

One of the biggest misconceptions about crypto and taxation is the idea that merely moving funds between wallets or exchanges triggers a taxable event. The good news? That’s not the case!

Transferring crypto from one wallet to another, even if they belong to different exchanges or are under different names, is not recognized as a sale. This means there’s no tax implication until you actually trade or sell that cryptocurrency. For instance, sending Bitcoin from a personal wallet to an exchange wallet doesn’t create a taxable event. However, once you sell or trade that Bitcoin on the exchange, taxes come into play.

In Conclusion

Navigating the crypto tax landscape might feel daunting, especially given its evolving nature. But by understanding the fundamental principles and seeking guidance from professionals or specialized software, you can ensure you’re meeting your tax obligations without undue stress.

Remember, every jurisdiction can have its unique approach to crypto taxation. Always keep up-to-date with local regulations and consult with a tax expert in your area.

Happy trading and invest wisely!

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The 4 Primary Divisions that the Deputy Commissioner for Services and Enforcement Oversee.

There are 4 major Primary divisions that the Deputy Commissioner for Services and Enforcement oversees (DCSE).

  • Large Business and International
  • Small Business/Self-Employed
  • Tax-Exempt and Government Entities
  • Wage and Investment

Out of these 4 Divisions, 60% of audits are targeted toward Small Businesses and Self-Employed (Schedule-C, Sole Proprietorship, Small Business Partnerships, S-Corps).

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Beneficial Ownership Information (BOI) Reporting Requirements Beginning January 1, 2024.

The Corporate Transparency Act (CTA) has introduced a significant reporting requirement in the corporate landscape. Effective January 1, 2024, companies are now mandated to disclose their beneficial ownership information, fostering transparency and accountability by providing authorities with crucial insights into the individuals or entities exerting substantial control over the organization.

What is Beneficial Ownership Reporting?

Beneficial ownership reporting is a regulatory requirement that mandates businesses to disclose information about the individuals who ultimately own or control the company. These individuals are often referred to as “beneficial owners.” The purpose of beneficial ownership reporting is to enhance transparency in corporate structures and prevent financial crimes such as money laundering, terrorism financing, and corruption.

What Is a Beneficial Owner?

A beneficial owner of a company is any individual who, directly or indirectly, exercises substantial control over a reporting company, or who owns or controls at least 25 percent of the ownership interests of a reporting company.

What Companies Are Considered Reporting Companies?

Entities obligated to submit reports are referred to as reporting companies, and they fall into two categories:

1. Domestic reporting companies encompass corporations, limited liability companies, and other entities established through the submission of documents to a secretary of state or a similar office within the United States.

2. Foreign reporting companies are entities, including corporations and limited liability companies, created under the laws of a foreign country and authorized to conduct business in the United States by filing documents with a secretary of state or an equivalent office.

What is the reason behind companies being required to submit information on beneficial ownership to the U.S. Department of the Treasury?

In a bipartisan effort in 2021, Congress approved the Corporate Transparency Act, establishing a fresh reporting obligation for beneficial ownership information. This legislation is a proactive measure by the U.S. government to increase the difficulty for individuals with malicious intent to conceal or profit from unlawfully obtained assets using shell companies or other concealed ownership frameworks.

What Information Will Be Required to Report About The Reporting Company, Beneficial Owner and Applicant?

A Reporting Company will have to report:

  1. The full legal name of the business
  2. Any trade names, “doing business as” (d/b/a), or “trading as” (t/a) names
  3. The current street address of its principal place of business if that address is in the United States (for example, a U.S. reporting company’s headquarters), or, for reporting companies whose principal place of business is outside the United States, the current address from which the company conducts business in the United States (for example, a foreign reporting company’s U.S. headquarters)
  4. Its jurisdiction of formation or registration
  5. Its Taxpayer Identification Number (or, if a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of the jurisdiction)

A reporting company will also have to indicate whether it is filing an initial report, or a correction or an update of a prior report.

A Beneficial Owner will have to report:

  1. Individual full name
  2. Date of Birth
  3. Residential Address
  4. An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document (for examples of acceptable identification)

Who Is a Company Applicant of a Reporting Company?

Only reporting companies created or registered on or after January 1, 2024, will need to report their company applicants.

A company that must report its company applicants will have only up to two individuals who could qualify as company applicants:

  1. The individual who directly files the document that creates or registers the company; and
  2. If more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.

The following flowchart can help identify the company applicant.

**Contact us for more details.

What Information Will Be Required to Report For an Applicant?

For each individual who is a company applicant, a reporting company will have to provide:

  1. The individual’s name;
  2. Date of birth;
  3. Address; and
  4. An identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of identification document.

The reporting company will also have to report an image of the identification document used to obtain the identifying number in item 4.

If the company applicant works in corporate formation—for example, as an attorney or corporate formation agent—then the reporting company must report the company applicant’s business address. Otherwise, the reporting company must report the company applicant’s residential address.

The ONLY Acceptable Forms of Identification:

  1. A non-expired U.S. driver’s license (including any driver’s licenses issued by a commonwealth, territory, or possession of the United States);
  2. A non-expired identification document issued by a U.S. state or local government, or Indian Tribe;
  3. A non-expired passport issued by the U.S. government; or
  4. A non-expired passport issued by a foreign government (only when an individual does not have one of the other three forms of identification listed above)

Deadline to Report my Company’s Beneficial Ownership Information to FinCen.

A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.

A reporting company created or registered on or after January 1, 2024, will have 30 days to file its initial beneficial ownership information report. This 30-day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

What Happens If My Company Doesn’t Report Beneficial Ownership to FinCen or Fails to Update the Information Within the Allotted timeframe?

If you correct a mistake or omission within 90 days of the deadline for the original report, you may avoid being penalized. However, you could face civil and criminal penalties if you disregard your beneficial ownership information reporting obligations.

To Learn More About The Reporting of Beneficial Ownership Information contact us!

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10 Tax Tips for Small Business Owners and Entrepreneurs in the Healthcare Industry

Running a business in the healthcare industry is both challenging and rewarding. To ensure that your financial health remains robust, it’s essential to be knowledgeable about potential tax deductions and savings. Below, we’ve compiled 10 tax tips specifically tailored for small business owners and entrepreneurs in the healthcare sector:

1. Stay Organized: Maintaining a clear record of all your business transactions, including invoices, expenses, and income statements, is paramount. This not only saves you time when preparing your tax return, but it also helps in the event of an audit.

2. Utilize the Home Office Deduction: If you use a part of your home exclusively for your healthcare business, you may be eligible for a home office deduction. Ensure that the space is regularly and exclusively used for businesses to claim this deduction.

3. Know Your Deductible Expenses: From medical equipment and software to continuing education and professional dues, many expenses can be written off. Keep receipts for all business-related purchases.

4. Claim Travel and Mileage: Attending seminars, visiting patients, or driving to medical facilities can add up. If you’re using your car for business purposes, track your mileage. The IRS offers a standard mileage rate deduction, or you can keep track of actual expenses.

5. Consider a Health Savings Account (HSA): If you have a high deductible health plan, an HSA allows you to set aside money on a pre-tax basis to pay for medical expenses. This not only benefits you personally but can also be advantageous for your employees.

6. Hire a Professional: Tax laws can be intricate and ever-evolving. Consider hiring a tax professional who’s experienced in the healthcare industry. They can guide you on deductions and credits specific to your field.

7. Stay Updated on Tax Credits: The healthcare industry often has specific tax credits, like the credit for providing health insurance to employees. Make sure to explore all available credits to minimize your tax liability.

8. Consider Retirement Plans: Contributing to a retirement plan like a SEP-IRA or 401(k) can provide significant tax benefits. As a small business owner in the healthcare sector, these plans can also serve as an incentive for retaining top talent.

9. Document Charitable Contributions: If you donate money, services, or equipment to charitable organizations, these contributions might be tax-deductible. Make sure to maintain proper documentation of all donations.

10. Reassess Business Structure: The way your business is structured (e.g., sole proprietorship, LLC, corporation) can have a significant impact on your tax obligations. Consult with a tax or legal professional to determine if your current structure is the most tax-efficient for your situation.

Final Thoughts

While these tips can help guide healthcare entrepreneurs and small business owners in managing their taxes, it’s always advisable to consult with a tax professional familiar with the intricacies of the healthcare industry. Regularly reviewing and updating your tax strategies can ensure you take full advantage of all available deductions and credits. This proactive approach can save you money and let you focus more on your primary mission: providing outstanding healthcare services. Contact Virsentual Business Solutions for more information.