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Get your college-ruled composition notebooks out, because you’re going to crypto tax school today.

PART 1: EVERYTHING YOU NEED FOR CRYPTO TAXES

It’s March, which means two things.

1/ My liver is in for a beating (St. Paddy’s day is only a week away)

2/ Tax szn is here

If you invest in crypto you know filing taxes can feel like this

Today we're gonna cover everything you need to know about crypto taxes in 3 minutes or you get your money back. This week we got:

• How to deal with NFTs?

• I'm consulting for Crypto. Do I have to pay taxes?

• How do airdrops work?

• Should I file as an individual or an LLC?

NFTs

Under the tax code, NFTs are classified as "collectibles" like paintings and baseball cards.

Let's say you purchase an NFT with crypto. There are two separate tax events every time you log an NFT transaction.

You have to start a new holding period for the NFT AND record the capital gain or loss for the crypto. Make sure you track when you first bought the crypto and the fair market value (FMV) paid, so you can report the correct capital gain or loss.

Then, let's say you sell the NFT for crypto or swap it for another NFT.

You have to end the holding period for the original NFT and start a new holding period for the crypto token or new NFT. (FYI: You do have to pay a 28% tax for any collectible or NFT you hold for more than a year).

Bonus: If your NFT is worthless you can sell it for 0 ETH and claim a loss for tax loss harvesting (free money). There are apps like CoinLedger and Unsellable that will buy your junk NFTs for you.

Double bonus: What about rug pulls?

Rug pulls aren’t technically considered thefts or scams. You won’t be able to claim a loss on these NFTs without a legitimate sale. Even though the abandonment rule, says a bad debt becomes a capital loss event it doesn't apply to NFTs since aren’t securities.

Do I have to pay taxes for Crypto Consulting?

Umm... this isn't a charity. Of course you have to pay taxes on income received via crypto.

You’ll be taxed at your income bracket based on the fair market value of the crypto on the date it was received.

2 important things to remember if you are a contractor paid in crypto: You need to track your income and the price of the token at the time you receive your payment.

Rollfi will do this for you, so you don't have to worry about it.

Airdrops

Airdrops are taxed as ordinary income, but ... what if you don’t claim your airdrop? Do you still get taxed?

You shouldn’t be, but tax code §1.451-2(a) says that unclaimed rewards can be taxed. Most airdrops don't have any FMV which makes this ruling less straightforward.

File as an individual or an LLC?

Should you start a business for your crypto trading?

First, you should only consider incorporating if you're a serious crypto investor.

Second, you have to decide what kind of company you want -> LLC, C-Corp, or S-Corp?

If you are thinking about setting up a single-member LLC, it offers ZERO tax benefits over being a sole proprietor. Since LLCs are pass-through entities you are required to report profits or losses as income on your individual tax returns regardless.

But there are some benefits to setting up an LLC for crypto investing:

• You may be able to write off expenses related to trading crypto (or mining it) and any capital losses incurred.

• You can set up your LLC through an agent too so you don’t need to have your name tied to the LLC

The advantages of a C-Corp are less obvious and using one could result in paying higher taxes. You can also file as an S-Corp which combines elements of C-Corps and LLCs.

If you want to become 🎶 a business, man & not just a businessman 🎶 I encourage you to consult a tax expert.

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5 MAJOR THREATS TO THE CRYPTO MARKET

Even though ETH (30%) and Bitcoin (33%) are up big this year, it's a weird time in the market.

Your friends over at RollFi got you covered like Richard Sherman on Crabtree.

Here are 5 things to look out for the rest of the year...

1. Mt. Gox Repayments

The disgraced crypto exchange, MT. Gox, is set to return $142k (~$3b) to their former customers.

$3b worth of selling pressure could put BTC in a spiral, but the tokens will be released in phases and it's unlikely everyone will sell right away.

2. Shanghai upgrade

Ethereum's Shanghai upgrade will take place in early to mid-April. Like the Mt. Gox situation, this could create selling pressure on the market, since people who staked their ETH can finally withdraw their money.

Right now, 17.5m (~ $27b) ETH is staked in the beacon chain. Even though it's unlikely every staker will sell (most of them are holding ETH at a loss), it could get rocky if people start cashing out.

3. Silvergate-gate

Silvergate was the king of crypto banks last year.

Their clients included Coinbase, Tether, Circle, and many more. Ever since FTX went bust the bank has been in rough shape. Then last week, the DOJ announced a lawsuit against Silvergate, every major client severed ties, and the stock crashed over 50%.

The stock is down 97% since Nov. 2021 and it could get worse from here.

4. MARCO

The CPI (how we measure inflation) is still way too high for the FED.

They want to lower inflation and said they will do it by any means necessary, which means raising rates and slowing down economic growth.

5. Regulation

The SEC and other regulatory bodies are cracking down on crypto.

Just last month, Kraken was fined $30m, Paxos (stablecoin issuer of Binance stablecoin) was forced to shut down the issuance of BUSD, and Binance is being probed by the U.S. government.

It's a pretty simple equation. The more the SEC and regulators crack down on crypto the worse it is for investors.

TAX MEMES

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Rollfi Inc does not guarantee and is in no way responsible for the accuracy of information provided in this message. All information is provided “AS IS” and with all faults. Data presented here may not reflect all activity in the market.