Crypto taxes

Filing taxes is hard, otherwise, there wouldn’t be any licensed tax professionals out in the world to do it for you. If you’ve ever seen the stack of forms and felt overwhelmed at all, don’t worry, you are not alone. Here are some common questions when it comes to filing your crypto taxes along with everything else.

Cryptocurrency tax

 

Q: What if I didn’t sell any of my coins? Do I still need to pay taxes?

A: If you didn’t sell any, you won’t need to pay taxes on them, but know that if you traded one cryptocurrency for another, that is considered a taxable event and you will have to report it. You’ll want to report it on the 8949 form.

 

Q: I didn’t keep a record of my transactions. What do I do?

A: Most exchanges have records of all trades made. You can scoop them up from there. But what to do if that isn’t an option? Well, you’ll have to do your best and remember them all. You can follow as many clues as you can, but you probably won’t be able to remember every minute detail. Listing what you can remember is substantially better than listing nothing at all and the IRS does allow for a margin of error. However, it is a good idea to keep track, in some way, of everything, it doesn’t matter how. It will benefit you in the long run.

 

Q: Do I have to pay taxes on my capital gains?

A: Yes, you do, like with all other financial gains. You can offset these with your losses, however.

 

Q: What if I got my crypto as a gift? Do I still have to pay?

A: No! If you received your crypto as a gift, you don’t need to pay taxes on it.

 

Q: But what do I need to do if I lost money on my cryptocurrency investments?

A: This will all be notated on your forms and you can even write off your losses, up to $3000 of income loss. Don’t forget, you have to have a record of this for it to be able to count.

 

Q: What is the difference between short-term and long-term capital gains?

A: Short-term capital gains refers to any monetary gain that you’ve received on your investments (less than a year). Once it rolls over to being over a year, it’s considered a long-term capital gain.

 

Q: What if maybe I forgot to or incorrectly added my cryptocurrency profits this year or last? Can I fix it?

A: Don’t panic, you can still fix it. It’s a 1040X Amended U.S. Individual Income Tax Return. Simply follow all of the previous steps mentioned to determine your capital gains (or losses) and put the information on the 1040X form. Then mail it in. It’ll take between 8 and 12 weeks to get the information properly adjusted once it’s received by the IRS. Or you can give it to your tax professional for help. You’ll still have to wait though.

 

Q: I don’t buy cryptocurrency, I’m a miner of cryptocurrency. What do I do? Do I even need to do anything?

A: Yes, it counts as income rather than just as property. Follow all the same steps as you would with filing for income, with the additional step of calculating the value of that income in USD. That’s it.

 

Q: What if I didn’t keep a record of the value of the cryptocurrency at the time of the trade? What do I do then?

A: There are websites out there that actually record the value of different cryptocurrencies on a daily (sometimes more!) basis. Find one you like and go with it. If that sounds like too much work, you can always use crypto tax software. 

 

Whew! That was a lot to cover really quickly, but I hope we have covered any questions that you may have had. With all the information that we have thrown at you as far as crypto taxes are concerned, you should have most, if not all, your bases covered. If you still need help, reach out and we will try to get your questions answered. It is important to have peace of mind knowing that your crypto taxes are getting done properly. There’s not much time left until the 15th, so it’s time to get to work!

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