Do I need to report Crypto on taxes?
Just as you breathe in air, it’s vital for you to exercise the need to also comply with tax regulations especially as a crypto trader turned taxpayers in the US.
Income, capital gains and losses as related to crypto are expected to be reported by you as a taxpayer. You should report your income on crypto on Form 1040 Schedule 1 or Schedule C for self-employment.
Similarly, report on capital gains and losses should be reported on Form 8949 and Schedule D. It’s therefore very important to exercise adequate documentation which initiates your compliance with the Internal Revenue Service (IRS) regulations.
However, claiming your losses on Form 8949 resulting from an engagement with fraudulent crypto project or exchange shutdown might represent a risky and aggressive approach in examining your tax position as a taxpayer because there might be another better approach to handling your losses.
One major way of which your crypto loss or theft case would qualify for a tax exemption is by declaring it an investment loss.
Overall, you must keep yourself from IRS penalties by getting appropriate calculations on your profits, losses and incomes as related to crypto.
Do I need to report Crypto on taxes?
One legalized requirement as related to cryptocurrency and taxes is to report it. Although, issues like non-profitability, losses via sales or swap of your assets in the course of the tax year might deprived you of fulfilling this requirement.
Failure to report cryptocurrency on your taxes is termed to depict you as fraudulent and may be subjected and charged for an attempt to evade or defeat tax.
Subsequently, you must also be aware that you may not be penalized if you make a genuine mistake as a taxpayer on your returns, but amendments must be done on your returns using Form 1040-X especially in cases where you’re unaware that you’re required to report cryptocurrency on previous years’ tax returns.
Besides, information may be provided on Form 14457 (Voluntary Disclosure Practice Preclearance Request and Application) to the IRS by taxpayers who had defaulted in the quest of reporting information as related to virtual currency.
However, it’s also worth of notice that the tax penalties being imposed as related to cryptocurrency is an exercise that unfolds within a swiftly changing space, and characterized by the continuous priority of the IRS to trace, monitor, and ensure tax basis calculation of cryptocurrency in order to prosecute defaults represented as cryptocurrency tax crimes.
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Conclusion
Now that you’re aware that reporting crypto on taxes is a legal requirement, you must also know that reporting crypto taxes is not an exercise that should necessarily comes with pain.
All you would need is to get adequate legal procedures on how to report crypto on taxes and how to duly file them.
Nevertheless, you must ensure you engage good monitoring of your cost basis since exchanges will not know. The cost basis is the total sum a trader actually paid for an asset, and determining it is crucial in ensuring accuracy in calculating your tax return.
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