What to do before 2023’s tax deadline
Swan Bitcoin CEO Terrence Yang joins Yahoo Finance Live to discuss paying crypto taxes, capitalizing on tax losses, and crypto exposure.
Video transcription
RACHELLE AKUFFO: Welcome back to this Yahoo Finance special, “Crypto in 2023,” brought to you by Intuit TurboTax. Well, tax season is upon us and returns are due to the IRS by April 18th. And there are plenty of new things to look out for this year, especially for crypto investors.
Joining us now is Swain Bitcoin CEO Terrence Yang. Thank you for being here. So Terrence, obviously in the last year we’ve seen a lot of losses. We have seen some stock markets collapse as well. What do people need to be aware of regarding the rule changes when submitting for 2023?
TERRENCE YANG: Secure. So basically before the 2023 tax deadline, right, your goal should be to pay the right amount of tax to avoid penalties, take advantage of tax benefits and reduce your audit risk, given that crypto has a target on its back as you said, Rachelle, with regulatory action .
So I would do a couple of things. I would make sure you collect documentation on sales and in crypto investments that went to zero, as many of them did last year when the bubble burst. And I will also download the tax CSV file you have from places where you bought your Bitcoin or crypto and use tax software. Could be TurboTax. Could be Bitcoin and crypto tax software like ZenLedger.
And finally, I would hire an accountant. Give them plenty of time to pay your taxes. Give them good documentation so they do a better job and think about tax deductions and credits you can qualify for.
BRAD SMITH: Is the IRS understanding of crypto a moving target here, Terrence, given the fact that there are so many changes year over year and even the type of ownership that people decide to have in relation to crypto?
TERRENCE YANG: It certainly looks that way, but us Bitcoiners, of which I am one, we have been warning people for years about how cryptos outside of Bitcoin are mostly securities, if not all securities. So for the IRS and other regulators to go after cryptos and consider them securities is not a surprise. We hate to say we told you, but this is something that anyone who has a legal background like I do or talks to their friends who are securities lawyers or just went to law school and took a securities law course, this was pretty obvious.
RACHELLE AKUFFO: So, Terrence, in terms of the mistakes you tend to see people make when it comes to filing their taxes when it comes to crypto, what tend to be the ones that stand out to you?
TERRENCE YANG: Secure. So a big one is not taking advantage of tax-loss harvesting where you can make lemonade out of lemons. So in 2022, many of us saw unrealized unrealized losses in our bitcoin and crypto exposure because many of us bought during the bull market, during the hype of 2021. So what you ideally want to do is sell and buy back your Bitcoin.
And earlier I would have said crypto, but given that the SEC and the IRS are taking a new look, a more aggressive look at cryptos and considering them as securities, you can’t actually buy back crypto immediately because you would violate the SEC 30-day wash-sale rule . Bitcoin is still property under IRS rules and should continue to be so. But regardless, if you have a loss in Bitcoin, you can sell immediately, buy again and lock in that tax advantage by crystallizing your – and realizing your capital loss.
BRAD SMITH: Terrence, what about small businesses that might have some Bitcoin on their balance sheet? I mean, we’re talking about publicly traded companies that have some form of crypto. They hold it as an asset or as an investment. But what about some of the smaller businesses that might also be “hodling”, if you will?
TERRENCE YANG: I mean, this is not advice, but if I were them, I would continue to “hold” or hold on to Bitcoin because, in the long run, if you can afford as a small business to keep your Bitcoin there and not sell it on five years or longer, it should go pretty well. The longer you can hold it, the more likely it is that this credibly limited supply bearer asset will be very valuable in the future.
Short term, who knows? As Warren Buffett would say, in the short term the markets are a voting machine. In the long run, it’s a weighing machine, and the weight of Bitcoin– Bitcoin’s fundamentals are very strong.
I’m not so sure about crypto. I wouldn’t have crypto at all. I wanted to get rid of it.
BRAD SMITH: All right, Swain Bitcoin CEO Terrence Young, thank you so much for joining us this morning. We appreciate it.
TERRENCE YANG: Welcome.
BRAD SMITH: Absolutely.
TERRENCE YANG: Thank you for having me.
BRAD SMITH: Coming up – yes, absolutely.
