Crypto’s Wild Week/ Proposed IRS Reporting Rules: Time to Move to Solo 401k/IRA LLC?

Harvard Law Attorney George Blower reviews the recent US Treasury proposal to increase IRS reporting of cryptocurrency transactions.

PROPOSAL: https://home.treasury.gov/system/files/136/The-American-Families-Plan-Tax-Compliance-Agenda.pdf

VIDEO SLIDES: https://www.mysolo401k.net/wp-content/uploads/2021/05/Crypto-Wild-Week-IRS-reporting-2.pdf

Proposed IRS Cryptocurrency
Reporting Rules

  • May 2021: US Treasury proposes increased IRS reporting requirement for cryptocurrency transactions
    • Currently, crypto exchanges must issue 1099-K if more than 200 transactions & $20k in gross proceeds
  • Regulatory Context: Continues increased regulatory focus (e.g. enforcement priority, 1040 reporting)
  • Who would be required to report?
    • Cryptocurrency/cryptoasset exchange accounts & payment service accounts that accept cryptocurrencies
      • Note: The language of the proposal does not limit the proposed reporting requirement to transactions greater than $10,000
    • Businesses that receive cryptoassets with a fair market value of more than $10,000
      • Compare with the current requirement to report cash transactions of $10k and greater (Form 8300)
  • Regulatory Objectives: Detect Criminal Activity & Tax Collection

Advantages of Crypto Investing
in Your Retirement Account

  • Tax Shelter/Tax-deferred
    • Potentially tax-free via Roth 401k/Roth IRA LLC ØSimplify Taxes
  • Since cryptocurrency is considered personal property for tax purposes, trading cryptocurrency or using it to purchase goods/services is a transaction subject to capital gains:
    • Transaction history including fair market value throughout to determine cost basis, etc.
    • Records to determine the length of time owned to determine if subject to short-term or long-term capital gains
    • Note: Many exchanges don’t provide this information
  • Practical Impact: Increased Reporting will increase the importance of opening the crypto exchange account under the EIN of the Solo 401k/IRA LLC

Advantages of Crypto Investing
in IRA LLC vs IRA

  • Access to a broader range of cryptocurrency exchanges
  • Ability to store cryptocurrency in a physical hardware wallet
  • Private Transactions
  • Invest in other alternative investments
    • Checkbook control

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About George Blower

I have the privilege of educating our clients about our products and services so that they can make informed and confident decisions about their financial future. Prior to joining My Solo 401k Financial, I served as the general counsel for a subsidiary of a Fortune 500 financial services company. Learn more about George Blower and My Solo 401k Financial >>

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