If you buy and sell cryptocurrency as an investment, you’ll likely have capital gains or losses that need to be reported on your tax return. FreeTaxUSA will help you with your reporting requirements.
What you need to file your Crypto
Before you begin, make sure you have all your transactions and/or statements at hand. This may be from a crypto tax service with Form 8949 that’s already been prepared, a year-end tax statement that’s like a Form 1099-B from your wallet or exchange, or even the transaction history in your account. You should keep detailed records of your own to make sure nothing is missed on your return.
Crypto gains and losses
If you’ve used cryptocurrency to make purchases or to pay for goods or services, it’s also possible you have capital gains or losses to report. For example, you sold some crypto, put it in your wallet, and use that to make some retail purchases. Moving the crypto from the market to your wallet would constitute a market transaction that would be reported as a capital gain or loss. Making retail purchases in and of themselves would not.
Here are some basic steps to properly report cryptocurrency transactions on your tax return:
- Maintain accurate records of ALL your cryptocurrency transactions, including dates of cryptocurrency purchases, receipts, payments for goods or services, and sales, the crypto amounts (plus transaction fees) involved, the value in U.S. dollars at the time of the transactions, and any other relevant details. Remember crypto exchanges and wallets do not have very thorough IRS reporting requirements.
- Maintain whatever financial statements are available from crypto exchanges. This should at least provide documentation of the cryptocurrency you’ve purchased and sold as investments for the year.
- Complete a Form 8949 using crypto tax software. This will give a summary of your crypto gains or losses that you can report on your tax return as one or two entries, and then you would submit the Form 8949 prepared with crypto-tax software with your tax return.
For more information on reporting crypto currency transactions visit our Crypto Currency page and start filing today.
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