Tax Day Tips: How Crypto Hodlers Can Prepare for Tax Season
• The Internal Revenue Service (IRS) treats cryptocurrency as property subject to capital gains taxes.
• Accurately reporting gains and losses can be a nightmare for crypto hodlers.
• Knowing the difference between short-term and long-term capital gains taxes, as well as keeping accurate records of every crypto transaction are important in filing crypto taxes.
Filing Crypto Taxes
The United States Internal Revenue Service (IRS) considers cryptocurrency to be an asset subject to capital gains taxes, making filing crypto taxes a crucial obligation for individuals and businesses. Keeping track of all transactions is essential in properly reporting gains or losses, while also understanding the differences between short-term and long-term capital gains tax rates are useful to avoid potential issues with the IRS.
Understanding Capital Gains Tax Rates
Capital gain tax rates vary depending on multiple factors, so it is important to understand them before filing your crypto taxes. These rates are available online and should be taken into consideration when filing your taxes. Additionally, it should be noted that transfers of cryptocurrency between wallets are not taxable events according to Lawrence Zlatkin, vice president of tax at Nasdaq-listed cryptocurrency exchange Coinbase. However more advanced trading activities may be considered taxable even if no 1099 forms are received from the IRS.
Where To Report Crypto Tax Information
Taxpayers should report any gains or losses when there is a sale, exchange or change in ownership through Form 8949 and Scheduled D of Form 1040 according to Danny Talwar, head of tax at Koinly. It is important that all records related to these activities are kept accurately as they may need to be provided during the filing process if requested by the IRS.
How To Avoid Issues With The IRS During Filing Crypto Taxes
In order to ensure accuracy during filing season and avoid possible issues with the IRS it is important that taxpayers keep accurate records of their transactions including prices paid for cryptocurrencies transacted, as well as understanding what constitutes a taxable event in terms of crypto trading activities such as changes in economic ownership which may not require a 1099 form from the IRS but still need to be reported for taxation purposes.
Conclusion
Filing cryptocurreny taxes can seem daunting due its complexity but following these tips can help make sure everything goes smoothly during tax season; understanding capital gain tax rates applicable for each situation, keeping accurate records of all transactions including prices paid for cryptocurrencies transacted as well as knowing what constitutes a taxable event will help ensure accuracy when reporting activities associated with cryptos assets held by taxpayers .
