Remember to File Your Crypto Taxes and Make a Good Faith Effort
April 17th is the U.S. tax deadline to file and pay taxes for 2018. U.S. residents will need to file their crypto taxes or file an for an extension by then. This is true for both state and federal taxes.
In other words, if you are United States taxpayer, you’ll ideally want to have your profits and losses calculated by April 17th and be ready to file both state and federal taxes and send out payments.
However, if you need more time to file, you can fill out the proper forms to file for an extension before or on April 17th.
If you file for an extension, you get an extra 6 months to file your taxes (which can be useful given how difficult calculating what you owe for crypto can be).
However, it is important to realize that an extension to file is not an extension to pay.
You’ll need to pay state and federal taxes on your crypto profits (along with any other income taxes you owe) by the deadline or face fees regardless of whether you file everything by the 17th or you file for an extension.
I won’t go over every detail of how taxes work with cryptocurrency on this page (we cover most of the basics here). Crypto is an investment property and sales of cryptocurrency to USD, using cryptocurrency to buy goods and services, and crypto-to-crypto trades are taxable events where the value of the cryptocurrency needs to be accounted for based on its fair market value in USD at the time of the transaction.
Calculating that is not easy, to say the least, but a CPA can help, and there are some tax software solutions which I consider “better than nothing.” One example is CoinTracking.
- Remember to file and make at least an estimated payment by April 17th. This will help you avoid hefty fees and in the worst of cases, federal prison. Filing for an extension and estimating what you owe is a “good faith effort.” It is likely to result in an audit or fees due to inaccurate estimates at worst. Meanwhile, avoiding the IRS and hiding your crypto profits could fall under the category of “tax evasion.”
- Filing your crypto related taxes is way harder than you might imagine if you did any significant amount of trades. See a CPA for assistance, check out some crypto tax software, and start preparing now so you can be ready to file and pay by April 17th. If you need additional crypto-specific guidance on filing an extension, here is a useful article on Steemit Need Additional Time to Nail Down Crypto Taxes? File an Extension!
TIP: Some people will be in a position where they made epic gains on paper last year, but then got “REKT” this year due to the long correction and its many traps. These people will still owe the IRS, but could in practice not have the money to pay their taxes. If you are in this group, you can work out a payment plan with the IRS. See an IRS article on how to work out a payment plan with the IRS.
BOTTOM LINE: The IRS likes it when you make a good faith effort to file and pay, even if that means filing an extension and working out a payment plan. The IRS does not like it when they have to come looking for you. If you made a lot of money on paper last year by trading or using crypto, then there is a good chance the I.R.S. will come looking for you if you don’t try to get right with them first. This is something that can happen down the road after fees and interest have stacked up. To avoid having that hanging over your head, file and get your payments organized by April 17th.