Crypto trading platforms, like Bitsgap, can be highly efficient for boosting your crypto gains. But if you run multiple trades across various exchanges, tax reporting can become quite tedious. In this article, we share more info on tax reporting and offer helpful tips to make the whole process easier for you.
❓ What taxes are applied to cryptocurrencies?
Typically, governments worldwide view cryptocurrencies as an asset or an investment. In the U.S., the Internal Revenue Service identifies cryptocurrencies as property.
Similar to other investments like stocks, when the crypto value increases and you sell it with profit, you are subject to a capital gains tax.
If you trade on crypto-crypto markets and use automated strategies, tracking the fiat value of your P&L might be challenging. Still, proper record-keeping can simplify your tax reporting at the end of the year.
📑 What records should I keep?
The most important record will be your trading history for each cryptocurrency exchange. Most platforms allow exporting a CSV or Excel file with all transactions a user made throughout the last year.
At the end of the year, you can import your trading history file to the preferred cryptocurrency tax app or do the calculations yourself with a spreadsheet editor.
📴 What tax software options are there?
Many companies offer innovative software tools to streamline cryptocurrency tax reporting and make it simple and hassle-free.
Cryptocurrency tax calculators, like CryptoTrader.Tax, integrate with all cryptocurrency exchanges to import the trading history and generate tax reports with a few clicks.
📃 What forms do I need to complete?
Depending on the country, you may need to complete different forms to report capital gains taxes. In the U.S., that form is known as IRS Form 8949.
Using the trading history records, you can fill out form 8949 and include your capital gains and losses for each trade during the last year. Total of all this results in your net capital gain or loss for the year.
Crypto tax reporting may seem daunting, but using the right tools will make the process much easier and faster. Trading history and tax apps can simplify the process, especially for those with many transactions across multiple exchanges.