Taxation on cryptocurrencies today
The biggest problem to solve while trading in cryptocurrencies is calculating taxes on crypto investments. Most people hate the idea of filing their regular taxes. The idea of filing taxes for cryptocurrencies is generally met even more frustration and loathing, but one must learn how to file crypto taxes.
To make things worse, cryptocurrency tax rules are different in each country. Many countries do not have any ground rules and regulations surrounding cryptocurrency taxation.
Dealing with cryptocurrencies is obviously much more difficult in such countries than it is in those countries with set regulations. The general population confusion with cryptocurrencies is wholly justified.
Despite the confusion, people across the world involve themselves with cryptocurrencies to different extents.
People have gradually come to realize that they can learn the basics of this system and learn how to file crypto taxes using crypto tax calculators.
Owing to the volatility and complexity of cryptocurrencies, people are apprehensive, yet curious about the value and role of cryptocurrencies in this day and age.
While most people understand that cryptocurrencies are secure, they realize that they are also prone to fraud and theft.
Central authorities and external influence are utterly helpless in this regard since cryptocurrencies are immune to foreign influence. While It is possible to trace transactions, it is not possible to track the accounts back to their respective real-world owners.
How to file crypto taxes – The basics
Firstly, cryptocurrencies are treated as stock, not as currency.
This implies that crypto is treated just like other forms of property, such as stocks, gold, or real-estate. You have to report your capital gains and losses from your crypto trades on your taxes like you would if you owned shares. Failing to do so will make you liable to tax evasion charges.
When a taxable event occurs, you trigger a capital gain or loss that you ought to file and report on your tax return. The IRS dictates the scenarios that would trigger a taxable event.
What triggers a taxable event?
- Trading cryptocurrency for fiat currency such as the US dollar.
- Trading cryptocurrency for a cryptocurrency (be sure to calculate the market value in USD at the time of the transaction)
- Using cryptocurrency for the purchase of goods and services (you ought to calculate the fair market value in USD at the time of the transaction just as you do it for crypto to crypto transactions).
- Cryptocurrency as a form income (It could be from mining or any other form of earned cryptocurrency)
What does not trigger a taxable event?
- Transferring a cryptocurrency as a gift does not trigger a taxable event.
- A transfer of cryptocurrency among your wallets is not a taxable event (this refers to transferring cryptocurrencies among wallets or exchanges without having to realize capital gains or losses)
- The purchase of a cryptocurrency with the US dollar does not trigger a taxable event. You do not have to pay taxes until you trade or sell the cryptocurrency.
- Donating a cryptocurrency to a tax-exempt organization or charity does not trigger a taxable event.
How to file crypto taxes?
To file and report your crypto taxes, you need to have the IRS form 8949 and 1040 Schedule D.
You begin by listing all your crypto transactions on the 8949 form with a few vital details – the date of cryptocurrency purchase, date of cryptocurrency sale or trade, your fair market value, the cost basis, and your crypto gain or loss. Make sure you include these forms in your yearly tax return.
Unfortunately, the reality is that it is often a difficult task for most people. Sadly, most people do not have the time or energy to file their crypto taxes manually. The best answer to how to file crypto taxes is getting a tax calculator.
Crypto tax calculators – Invaluable tools
This crypto tax calculator is built to be an easy tax reporting solution. It lets its crypto users compile their transaction history by integrating the numerous exchanges and placing them into one platform.
It automatically generates the tax reports for the crypto traders, similar to 8949. Numerous of crypto users have understood how to file crypto taxes without having to put in too much time.
ZenLedger is an easy to use, hassle-free way to calculate your crypto taxes. It is associated with the best exchanges and supports the major crypto and fiat currencies.
The online platform imports the cryptocurrency user’s transaction data from the exchanges into its interface in a short time and documents your tax.
The documents include a variety of aspects like capital gains, income, donation, and closing reports.
In addition to this, it provides the user with profit and loss statements. All of the documents generated via ZenLedger can be imported from the platform into your tax returns without a problem.
It is widely known as one of the easiest ways to calculate your crypto taxes. The platform is integrated with a whopping 25 significant exchanges to calculate your gains and export your documents to file your taxes.
BearTax contains a number of useful features. Firstly, the user interface is easy to use and navigate. Your withdrawals and deposits across the exchanges can be viewed without on the interface without issues.
Its matching feature makes sure you avoid negative funds, which could result in reduced accuracy when you file your tax report.