If you’ve invested anything at all, you want it to be reflected in your taxes accurately, but how? Now that we’ve covered the basics of crypto taxes, we can go over everything that you’ll need to be able to file your crypto taxes. It can seem like a daunting task, but we can help walk you through everything that you would need to file yourself or to take to your accountant. Follow these steps, and you’ll have filed them in no time.
You’ll want to have a full record of your investments from throughout the year. Start with a list of every exchange that you ever used to buy, sell, or trade your currency, as it’ll be pertinent in your cost basis calculations. Find your records for all cryptocurrency you received as income, a gift, or from a fork, split or airdrop, carefully notating the specifics of each. It’s best to keep all of your records safe and together as best as you can until it’s time to file your crypto taxes
Before you can calculate these gains and losses, you’ll need two things: the cost basis and the value of the currency at the time of the trade. The cost basis refers to the original value of the crypto. Once you have both of these things, you can calculate the capital gain by subtracting the cost basis from the fair market value of the currency.
Let’s simplify this for the sake of understanding. If you buy one Bitcoin for $200 and about a year later trade it for another crypto, say Ethereum. If the fair market trade at the time is $430. Your capital gain in this instance would be $230. Easy, right?
Now do this for every trade you made throughout the year. It’s overwhelming. There is crypto tax software out there that will help you to input all the information directly from your exchange websites and give you the answers in minutes, even allowing you to download the results or upload them to your tax software to help make this part significantly easier.
Now that we’ve compiled all of the information and finished crunching the numbers, it’s time to fill in all the little squares on the forms. This is equally daunting, but with a bit of help, we can cover everything for you.
Look at that! You’re done! From here you can send in your taxes via mail, internet, in the case of filing websites, or through your tax professional. If you send in your tax forms digitally, it’ll take around 21 days (three weeks) and if it’s sent in through the mail, between six and eight weeks.
Filing taxes is like getting a root canal without the anesthesia sometimes, but even a little relief can go a long way. By following these steps, you can get everything filled with some sense of grace and composure. Hopefully, we’ve helped to lower that hurdle just a little bit to make the jump that much easier. If you have any trouble over the course of filing your crypto taxes, it’s best to reach out to a tax professional for help.