If you are already into crypto trading and other activities related to this market, you probably know that your transactions and crypto belongings are considered taxable events, according to US laws and regulations. The policies may vary from one state to another, but in general, that means you will anyway have to file a tax form and include your crypto transactions. If you are working with a large volume of money, it’s always best to keep track of your activities, run a journal, and save your trade history, so you can access that data and calculate the taxes a few months after.
Some trading platforms will keep a record of every activity, and you can use that information when filing for taxes, according to the IRS requirements.
Their regulations say that every person who owns a virtual currency and performs payments and different activities using them should file for a tax return. Calculating that amount can literally be a nightmare, especially if you are doing that for the first time in your life. In general, you will need information about the type of cryptocurrencies you use, the date of the transaction, how did you get them, their value in dollars, and a record for the completed transaction. Once you have them all, you can start calculating by yourself, or you can hire an accountant to help you out with this one.
The most important thing is to keep track of your crypto history, just in case, especially when you want to trade bigger. So, here are a few ways how to do that:
1. Keep all your records of your trading history
A lot of active crypto traders use different platforms to trade, and the good thing is that almost all of them have this option that helps you record all the needed information for taxes. Trades are considered as a taxable event according to US laws and policies. If you are looking for a trading platform that offers all these things to the users, check this go url and see how the things are done. When using a good trading channel, you can be sure that you will always have an insight into the money spent and fees you’ve paid while doing that.
2. Pay attention to the different exchanges
If you use different accounts to exchange different cryptocurrencies, you need to track them all, so you can be sure you won’t miss something. Manage your accounts properly, and use strong passwords, so you can be sure no one else can access your data. There were cases in the past when some hackers manipulated the information, and the users were losing their exchange funds. So, no matter how strong your passwords and passcodes are, you always need to extract the trade and exchange history. In many cases, the tax fees will be deducted from the amounts, and it would be easier for you to file the tax form and report it to the IRS.
3. Keep a record of your mining transactions
Some crypto enthusiasts prefer the old way of getting rewarded. They are choosing to mine, instead of trades and exchanges. But, this is also a taxable event, but it’s different than the trades. You need to keep every information about the transactions, as you put the coins in your digital wallet. Mining is considered a form of crypto income. Trading is a capital gain. So, that means the tax fees can be pretty different. Your mining earnings will have lower taxes than the trades, and you must be aware of this one when reporting your annual file.
4. Start getting ready for this on time
Our suggestion is to keep records for every activity you take on the crypto market. That will help you have all the documents and information you need to fill up the tax report. Don’t wait until the deadline, because it’s very easy to miss something, and face some law problems because of that. So, we highly recommend running a journal of every transaction you are performing, no matter how big it is, so it would be easier for you to match them all together and file the needed form, fulfilling your obligations as a citizen of the United States.
Also, in order to avoid trades that lead to losing money, you need to:
Stop making decisions when you are too excited
Large volume trades are good, but also risky, especially if you choose some particular moment when the things aren’t clear enough. It can easily happen to invest a lot and lose the whole amount the very next day. The key is to be consistent, because when you add all the additional expenses you have on your income and capital gains, some actions may not be worth the effort and money.
Don’t trade when you are stressed or nervous
It’s a great moment to make a bad decision. All those decisions that are related to your capital gains (as the crypto trades) can affect your tax history. As you know, you don’t do anything while you are stressed out, so don’t play with your money too while it lasts. One day, you will be very sorry if you lose a lot of money, or trade when the conditions are bad, and you will still have to pay the taxes for that.
If you want to be sure you didn’t miss anything, and that you are completely aware of every crypto action you take, you can use some of the accounting software solutions. Our honest suggestion is to hire someone to help you with this one, but it’s completely understandable if you want to do that by yourself, without sharing these valuable things with anyone else.
When it comes to understanding the taxes, make sure you know what you need to do with your crypto profits, and which forms are required to report them. Don’t try to skip the taxes on purpose, because IRS already knows about your capital gains and income – so you won’t do anything good with that.