Here are some last minute tax tips for crypto traders and investors in the United States.
First off, here is the full ins and outs of taxes and crypto.
Second off, I’m not a certified tax professional, I am just trying my best to convey the basics of crypto and taxes. So the best advice I can give is “see a tax professional.”
That said, here are some last minute quick tips:
- The core of what you need to do for the IRS in respect to cryptocurrency is fill out and submit Form 8949 and 1040 Schedule D at tax time. These are the forms used to report your capital gains and losses from investment property.
- If you aren’t going to make the deadline, you can file an extension!
- You should report your crypto holdings regardless of how much trading you did. That at least says “hey IRS, I have this much crypto, and I’m not trying to hide it from you.”
- If you had gains or losses, you should report them. You don’t need to report every trade, just your gains, losses, and current holdings.
- In general, if you didn’t spend your crypto or convert your crypto to another crypto, you for sure don’t owe taxes on it. That is to say, as long as you HODL, the rules are very clear, you don’t owe taxes for doing nothing.
- If you did trade one crypto for another, sold to cash, or used crypto to buy something, then you could owe taxes (you might not, it depends on if you realized a gain large enough to owe them).
- Even if you don’t have gains, you might have losses worth reporting. You can write off capital losses against gains in a year and then carry forward $3k worth of your loss each year to lower your future tax bills.
- It is illegal to commit tax evasion. So, if you made a lot of crypto trading or a lot of money, do report your gains and holdings!
- If you had a staggering loss, for example if you mostly just HODL’d crypto all year and never sent a cent to your bank account, or if you made a few mistimed trades, then see a tax professional. A tax professional can help you to make a bad situation less bad, because they understand the tax code in ways you do not.
- Whatever you do, make a good faith effort to do the right thing.
So that is the basics. The gist being report your holdings, report your gains and losses, don’t commit tax evasion, and do see a tax professional if you have time… and if that all seems impossible in the amount of time you have left, consider filing an extension.