Filing crypto taxes

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 taxeswe 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.


Before you get started

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

Filing crypto taxes

Step One: Calculating your capital gains and losses

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.


Step Two: Forms, forms, forms

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.

8949 Sales and other Dispositions of Capital Assets Form
This form is where you document all of your short term and long term capital gains, either through the sale or trade of your property, including but not limited to cryptocurrency. You notate for each trade, including the information on the amount of crypto traded in the deal, the date traded, the price of the crypto at the time of the trade, the cost basis, and the gain or loss that occurred due to the trade. Part one is for short-term and part two for long-term. Fill in the information for each trade throughout the fiscal year.
1040 Schedule D Capital Gains and Losses
This form is where you compile all the information from the other forms you’ve filled out reporting all gains and losses for the year, for both short-term and long-term capital gains and losses. This requires you to fill in information from your previous 8949 trades, as well as other assets that don’t relate to your cryptocurrency. You’ll need several different forms to complete this one outside the breadth of this article. If you have trouble filling out the form in its entirety, please reach out to a tax professional for help.
1099-K Payment Card and Third Party Network Transactions
While this form is generally reserved for small businesses, if you trade a significant amount of cryptocurrency, you’ll also receive the 1099-K form. If you use a service to trade crypto, you’ll receive it — but only if you perform more than 200 transactions, valuing more than $20,000 in total. If you have hit both of those criteria, you need to be able to provide the gross amount of transactions made per month, as well as the gross amount of the transactions made.


Step Three: File that paperwork!

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.