Filing Your Crypto Tax Return In The US

Filing Your Crypto Tax Return In The US

Cryptocurrencies will be one of the key topics during the current tax season in the United States. 

It is not just that Ohio is accepting tax payments in bitcoins, or Wyoming approved cryptos as personal properties, but also how people will report their gains or losses in cryptocurrencies and the possession of digital assets. 

The United States tax season is here, let’s dive deeper on what to do and how to do crypto taxation. 

According to the United States legislation, every digital currency transaction including mining, spending, selling, trading or exchanging a digital asset is taxable, and it should be reported for tax purposes. 

As CoinMarketCap highlighted in a recent article, less than 900 people reported bitcoin transactions between 2013 and 2015; however, that is about to change. 

Many people assume that the crypto industry anonymity provides them with a cover from tax reporting; however, in the US, this is not the case.

Technology is evolving, and the IRS found ways to get information about you and your transactions. Remember that blockchain is an open source and everybody can watch your records.

That being said, reporting is on you. In the United States, the broker or trading platform will not issue a 1099 tax form for cryptos as it does for stocks. You will have to handle it.

Tracking your profits or losses

Similar to the way stocks are taxed, you need to pay attention to the tempo of your gains or losses. Are the profits collected in the short or long term? Long term profits are typically 1 year or longer. Depending on the time window, you need to pay the following tax percentage. 

how to file US IRS Tax

You should also keep track when you bought the crypto, how much you paid for it, and when you sold it. Last but not least, calculate your profits or losses.

One thing that investors should understand is that taxation is a very sensitive matter for the US government. Seriously, you do not want to mess with the IRS. Never try to cover up a transaction. 

Audits are random in most cases, but the technology used by the Internal Revenue System is implementing new software that raises red flags with each hole in your returns. Just keep in mind that a person convicted of tax evasion is subject to fines of up to $250,000 and with a prison term of up to 5 years. 

International transactions matter in your tax returns

In your tax return filing, include all brokerage, wallet, or banking account containing cryptocurrencies overseas. 

The United States, together with the IRS, last year joined the Joint Chiefs of Global Tax Enforcement, an international task force to fight against tax evasion on cryptocurrency related matters. 

The United Kingdom, Canada, Australia, Netherlands, and the United States are sharing information, for offshore accounts and cryptocurrencies to account for tax evasion. 

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