Filing cryptocurrency taxes is often challenging for many crypto traders. Your crypto tax reporting can become a headache if you don’t use the best crypto tax software. Because there are so many options out there, you could easily feel overwhelmed. However, it is important to properly understand your requirements before you start accounting.
For casual traders dealing with crypto on a hobby level, CryptoTrader or Accointing will help you get the job done. The best tax crypto software allows for full integration with the leading exchanges and wallets, and their user-friendly interface can help you complete the task within seconds.
How to File Your Crypto Taxes
If digital currencies like Bitcoins rule your world, now is probably the best time to get your crypto taxes well-organized.
In filing your crypto taxes, try to keep the following facts in mind.
- Record your transactions
Try to keep a complete record of all crypto trades including how often you buy crypto per week as well as your sales. You should want to keep your digital receipts handy. Some taxpayers find it difficult to file their taxes because they fail to properly record their trading activities.
Let each transaction be recorded if you invest in exchanges. That helps in bookkeeping as you will be able to file your crypto taxes much more easily if you have your data readily available.
- Use a crypto tax software
If the trading platform doesn’t keep a log of your crypto transactions or you transact on multiple platforms, there are still solutions for you: some software companies have systems that can scan the blockchain and give you a rundown of your crypto transfers between your wallets.
Resources like Koinly and CoinTracker allow you to connect to exchanges and track your wallet transactions. These options can help you to complete forms when you need to file crypto taxes.
Several factors may determine how long it takes to report your cryptocurrency taxes. For example, things like the number of coins you own, exchanges used, and your trade volume across all exchanges can ultimately decide the total time it takes to file your taxes. You could check YouHodler for more info on the best tax software for crypto.
- Fill out the correct tax forms
You will need to complete some tax forms such as Schedule D, C, and 1 based on how you transacted in crypto. As long as you have a record of your crypto transactions, this will be a far less stressful task.
- File your taxes
For those who keep their records using Koinly and CoinTracker software, they can link them with the online tax software of their choice and file their overall federal and state taxes. Are you looking for the best free crypto tax software to prepare your crypto taxes? TokenTax can provide you a full suite of accounting services to file your regular and crypto taxes.
- Get a crypto tax professional
As explained earlier, filing cryptocurrency taxes can prove cumbersome since the laws on digital currencies keep changing. If you have earned a substantial amount of money from crypto, you may want to work with a professional accountant as well as using the best crypto tax tool.