How to Stay Safe This Tax Season
Tl;dr: During tax season, it's vital to be on high alert for scams, including phishing emails and fake IRS calls. Coinbase advises using secure tax reporting partners like TurboTax, Crypto Tax Calculator, CoinTracker and H&R Block, and strengthening your defenses with measures like two-factor authentication or a physical security key. Educate yourself on the taxable aspects of crypto transactions and choose reliable tax assistance to navigate the complexities of crypto taxes safely.
As Americans try to find time to get their taxes done, they should keep in mind that tax season presents a prime moment for scammers to do their work. Here are some things to consider during tax season to keep your assets safe and secure:
Look out for the usual suspects
Taxpayers must disclose to the Internal Revenue Service (IRS), and certain U.S. state tax agencies, all transactions involving cryptocurrency sales, conversions, payments, and earnings. Each type of transaction carries its own tax reporting requirements. Cybercriminals know this, but they also know that navigating how to file can be confusing to the layperson.
Before we get into crypto-specific examples, some usual suspects seen in holiday scams apply during tax season but look slightly different. For example, bad actors may use phishing tactics that take the form of an email offering you to “claim your refund now” with a link that leads somewhere you definitely don't want to visit. Delete that email.
Another unique approach during tax season is a phone call from someone who is pretending to be from the IRS. This person usually has some sense of urgency in their voice and claims that you owe the agency money that you must pay immediately by sharing sensitive financial information. They may even go as far as to say you face arrest if you fail to comply. Don’t fall for the intimidation tactics. To help you stay vigilant, the IRS offers a comprehensive list of scams to keep an eye out for.
Choose your partners wisely
As it relates to crypto, the biggest challenge is how to report your income or losses from your activity during the last tax year. This is still relatively complicated, and crypto owners aren’t always sure how tax applies to their crypto transactions. This often leads them to seek advice from a third party expert. Coinbase maintains partnerships with TurboTax, H&R Block, Crypto Tax Calculator and CoinTracker, and also recognizes Koinly and TaxBit as companies that can provide good counsel on your cryptocurrency tax burden.
But choosing other vendors could present a vulnerable moment. Whenever you’re sharing sensitive information with a third party, criminals lurk. There are many “services” that may, on the surface, look very legitimate but are fronts for cyber criminals who are trying to gain access to your personal information, so beware.
Double down on protection
Keeping your eye out for phishing scams and hanging up on those IRS impersonators (and all the other scam methods) are just a few ways to protect yourself. Adding layers of security, such as two-factor authentication (2FA), is increasingly popular because it significantly lowers the risk of being hacked. It even protects you from most hacking attempts. ((aAs of a year ago, 96% of users chose SMS codes for logging into Coinbase.).
But 2FA isn’t foolproof. A determined hacker could still compromise it. The most robust defense for your device and its contents is a physical security key. It effectively prevents remote hacking, and even if your device is stolen, access is impossible without the key.
Follow this Checklist
As you sit down to gather all your documents and prepare your taxes, you should feel well-equipped to know what to look for to keep yourself secure. Here’s a quick checklist:
Make sure you have proper security measures in place (2FA or a physical key).
Educate yourself on common methods like phishing and people impersonating the IRS.
Use Coinbase’s guide to learn what is and isn’t taxable.
If you’re unsure of how to determine what is or isn’t taxable, choose a vendor that is verified by Coinbase (TurboTax, H&R Block, Crypto Tax Calculator, CoinTracker)
Find a reliable tax accountant or advisor who can help you and choose one that understands or is sensitive to how crypto is taxed.
Spending that little bit of extra time preparing yourself, your paperwork, and your tax specialist can make a huge difference as you begin to incorporate your crypto portfolio into your annual tax return preparation. May your refund be large and your tax burden light!
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