Tax Day is April 17th, Make Sure to File For Crypto or File an Extension

Although We Wrote About the Topic Before, Here is a Timely Reminder to File Your Crypto Taxes

Tax day is April 17th (in the U.S.), you’ll need to make sure you have all your crypto trades, sales, and transactions reported. If you can’t get this done in time, consider an extension.

Please note that an extension extends the time you have to file, but not the time you have to pay. You need to reasonably estimate and make a payment either way; overpaying means no fee later while underpaying could result in a fee on top of having to pay up the rest; learn about extensions at Turbotax).

Reporting your crypto taxes is really hard if you have made a decent amount of trades due to the requirements of reporting capital gains on investment property combined with the less than helpful records keep by the exchanges.

In fact, “really hard” is an understatement; It is impossible to accomplish at times and be very time-consuming.

Those who put this off until the last minute and don’t get the help of a CPA have the potential to be up against a next to impossible task. Even those who do see a professional may realize they need more than a few days to get everything in order.

If you are facing the impossible, you can file for an extension for your taxes. Filing for an extension has a number of implications, but it is on the table as a “get out of federal prison for tax evasion or tax fraud” free card, and that is a plus.

Learn more about filing your crypto taxes.

Learn more about crypto taxes and extensions.

TIP: In general good faith efforts that result in mistakes are likely only to result in a fee. Willful evasion of the tax code is meanwhile a federal crime. If you moved a bunch of crypto and don’t report or underreport, you open the door for the IRS to assume that you knew you had to pay taxes on it and thus willfully committed tax evasion or tax fraud. That is not good. The key here is a good faith effort. See Income Tax: Fraud vs. Negligence.

TIP: If you moved more than $20k around in crypto, you would really be rolling the dice by not filing. The IRS is very likely to audit you and charge you a fee if you don’t file. Meanwhile, if you moved enough and don’t report your gains and losses, they could charge you with the federal crime “tax evasion.” Nothing good can come from dodging the IRS. Thus, my advice is to file or file for an extension. Square up now and avoid the headache down the road.

See the possible punishments for willful evasion below. They are harsh and important to avoid (below are excerpts from FindLaw.com which archives laws, rules, and regulations):

• Attempt to evade or defeat paying taxes: Upon conviction, the taxpayer is guilty of a felony and is subject to other penalties allowed by law, in addition to (1) imprisonment for no more than 5 years, (2) a fine of not more than $250,000 for individuals or $500,000 for corporations, or (3) both penalties, plus the cost of prosecution (26 USC 7201).

• Fraud and false statements: Upon conviction, the taxpayer is guilty of a felony and is subject to (1) imprisonment for no more than 3 years, (2) a fine of not more than $250,000 for individuals or $500,000 for corporations, or (3) both penalties, plus the cost of prosecution (26 USC 7206(1)).

• Willful failure to file a return, supply information, or pay tax at the time or times required by law. This includes the failure to pay estimated tax or a final tax, and the failure to make a return, keep records, or supply information. Upon conviction, the taxpayer is guilty of a misdemeanor and is subject to other penalties allowed by law, in addition to (1) imprisonment for no more than 1 year, (2) a fine of not more than $100,000 for individuals or $200,000 for corporations, or (3) both penalties, plus the cost of prosecution (26 USC 7203).