Step By Step Guide To Filing Your Cryptocurrency Taxes

Written by on May 1, 2021

The tax deadline (Might 17, 2021) is quick approaching. In case you had cryptocurrency transactions throughout 2020, right here’s precisely what it is best to do to file your taxes precisely on time. 

Taxable Vs. Non-Taxable Transactions 

First, see in case you had any taxable transactions throughout 2020. Under is a non-exhaustive listing of taxable and non-taxable cryptocurrency transactions.

In case you didn’t have any taxable transactions, you typically don’t have any cryptocurrency particular submitting requirement. Nevertheless, some non-taxable transactions equivalent to receiving a present might set off you to verify “Sure” on the digital foreign money query on Kind 1040 ‒ “At any time throughout 2020, did you obtain, promote, ship, change, or in any other case purchase any monetary curiosity in any digital foreign money?”

Collect Info

Info gathering is the following step. Log in to your exchanges, wallets and different platforms to see if there’s any tax paperwork (Ex:- Kind 1099-Okay & Kind 1099-B) within the Tax heart. Proceed to the following step in case you see a Kind 1099-Okay and/or a Kind 1099-B with incomplete value foundation. Ensure to obtain the transaction historical past report in case you don’t see any type of tax types. 

In case you see a Kind 1099-B with value foundation data (unlikely), you possibly can skip the following step and straight go to tax submitting.

Cryptocurrency Tax Software program

After getting all of the transaction knowledge, you need to use a cryptocurrency tax software program to reconcile your transfers, trades and different transactions to reach at capital good points (or loss) and different earnings it’s worthwhile to pay taxes on. With out this reconciliation, you can be underpaying or overpaying taxes.

(Notice that cryptocurrency tax software program don’t typically file your taxes with the IRS. They solely reconcile the capital good points and losses associated to crypto exercise)

File Taxes With The IRS & State

As soon as the capital good points and losses are totally reconciled utilizing a cryptocurrency tax software program of your selection, you need to use a self-serve tax submitting software program like TurboTax or an accountant to really file your tax return with the IRS and the state. 

Disclaimer: this put up is informational solely and isn’t supposed as tax recommendation. For tax recommendation, please seek the advice of a tax skilled.

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