Beyond the charts and price fluctuations, another scary area in crypto is taxation. Many factors account for this, the most important of which is unclear tax rules from authorities.
The truth is, just like how daunting it is to monitor the crypto market, crypto taxes can equally be neck-breaking. We sometimes forget to include the most important details when filling. At some point, we tend to forget completely and end up paying penalties.
Whatever situation you’re in, you’re at the right place. We’ve prepared this crypto tax checklist to help you crosscheck what you need when filing your taxes. From the right tax forms to calculators, this checklist has all you need and the importance of each item to your tax filing.
- List of all the exchanges you use for trading and investing
- A record of the crypto you’ve received as income
- A list of your crypto donations
- Record of all your receipts from Airdrops and Forks
- A record of cryptocurrency you’ve received as a gift
- The right form: IRS Form 1040 Schedule D and 8949
- The right cryptocurrency tax calculator (Eg: BearTax)
- The right tax tool (Eg: TurboTax)
- An accountant/CPA for consulting
- Some knowledge about your country’s tax laws
Why do you need these? And how does each one of them help you file your crypto taxes? Let’s go.
List of exchanges for trading and investing
To calculate your crypto taxes, you need a list of the exchanges you use. You convert fiat to crypto, convert crypto to crypto, and do a lot of things on these exchanges. Meaning, this is where your cost basis comes from and you’ll need to prepare your taxes. All this data is used by your crypto tax software when filing.
List of mining platforms
For miners wanting to file their crypto taxes, the best place to start is to list all the mining platforms you’ve been using. Whether you’re investing in mining rigs yourself or doing cloud-based mining, everything should be reported for proper tax calculation.
Record of crypto you’ve received as income
You need to provide the history of your income if your employer pays you in crypto. Today, many writers, designers, and developers in the crypto community take their payment through crypto. And since you’ll be paying income tax on your earnings, it’s only right that you keep records to make filling easy.
Record of your crypto donations
Are you someone who donates crypto for societal causes? Then you need to record these donations as part of your tax filing process. And since donations are not subject to capital gains tax, you’ll be able to deduct the value of your donations and file accordingly.
Record of your receipts from Forks
All the coins you have from forks will be in your exchange, so you will think there’s no need to record this separately. However, after a fork, the money in your exchange account will not have a “source”. From a record-keeping position, things would look like these coins just came from nowhere. That’s why it’s important to keep records separately and show that they came from a coin split or fork.
Records of your receipts from Airdrops
While their popularity has gone down over some months now, airdrops are still a thing in the crypto community. If you’ve got airdrops from a project, you need to list them when filing your taxes to help track the source of every crypto income
History of crypto received as a gift.
Your boyfriend? Your parents? A friend? Wherever your crypto gift comes from, make sure to keep records of when and how much you took.
The right crypto tax calculator
Crypto tax calculators are the tools of the game when it comes to crypto taxation. There are a lot out there now, but one that gives you the most features at the most affordable rate is BearTax. You can track your transactions, calculate your crypto taxes, and transfer the results to your favorite tax software.
Understand the tax forms and what each one requires
The most important tax forms you’ll come across when filing crypto taxes are IRS Form 1040 Schedule D and 8949. Schedule D Form 1040 is used to report capital gains taxes. As someone in the crypto space, this is what you will need to report your taxes since the IRS treats cryptocurrencies as “property” for tax purposes.
But you have to complete Form 8949, which deals with sales and other capital assets dispositions. After you fill this form, you then have to carry the subtotals to the Schedule D (Form 1040), where the total gains and losses will be finalized. If you want to succeed, this is a crypto tax checklist you don’t want to ignore.
The right tax software
You need a traditional tax software after you’re done with crypto taxes. This is done to help you combine your crypto income with other income sources to calculate taxes for the entire year. The most popular software in the US is TurboTax but there are other calculators as well. And BearTax helps you move your crypto filling into any tax calculator of your choice with a few clicks.
A CPA with knowledge in crypto taxation
While a lot of software programs like BearTax will help you with crypto taxes, you will need a CPA for some consultancy services, sometimes. Since CPAs know the ins and outs of the tax laws, it’s good to consult them to know if you’re on the right path. CPAs will also ensure that you report your tax accordingly, deduct what isn’t taxable, and save you from penalties that come as a result of improper filling.
Knowledge of your country’s tax laws
Is cryptocurrency a property or a currency? That depends on where you live. Of course, your tax software can help you do all that. But it’s still prudent to monitor your country’s stance on crypto taxation. This will help you identify how your country classifies crypto, including as property, currency, or a legal method of payment.
Start your crypto taxes now
After you’ve gone through this crypto tax checklist, you’re on the path to calculating your taxes. For those looking for more in-depth guides on crypto taxation and the penalties for not complying, here’s a guide to help you.
While the crypto tax checklist above would give you all the details you need, always be on the lookout for updates. The crypto community changes every hour and those who update themselves with the latest news and resources succeed.