Your questions answered
Frequently Asked Questions
Do you have to pay taxes on your crypto?
In most cases, yes. If you sold, traded, or spent crypto, you will have a capital gain or loss that needs to be reported on your tax return. You also need to report income from staking, airdrop, interest, nodes, mining, etc.
Do I have to pay taxes if I haven’t cashed out?
If you sold, traded, or spent crypto, then you have capital gains and losses that need to be reported, regardless of whether you cashed out or not.
Do I have to report my crypto if I didn’t receive a tax form from the exchange I used?
Yes. As of right now, crypto is a self-reported asset, and you need to calculate and report your own income and gains and losses, regardless of whether you received a 1099 or not. If you need help with this, feel free to reach out!
What are the tax rates for crypto?
In general, your crypto income will either be classified as ordinary income or capital gains. Your tax rates are determined based on your total income and filing status, but ordinary income and short-term capital gains can be taxed up 37% and long-term capital gains can be taxed up to 20%. If you are a resident of a state that assesses income tax, you may also have to pay state tax on top of the federal tax.
What happens if I do not pay my crypto taxes?
If the IRS audits you and discovers that you have not reported your crypto activity on your tax return, you will be required to pay the tax at that point, as well as penalties and interest. In more serious cases, if the IRS determines that you were purposefully evading taxes on your crypto, you can face serious fines and even jail time.
What do I do if I haven’t been reporting my crypto in the past?
First off, know that you aren’t alone. The majority of our new clients need to catch up on multiple years when they start working with us, so we have navigated this many times. The best thing to do is to start by reconciling your transactions so we can determine what your income and gain/loss was for each previous year. Then if needed, we can help amend your previous tax returns.
Do I have to file a separate return for my crypto activity?
No, your crypto activity will be reported on Form 1040, which is your normal individual income tax return. If you need help filing your tax return, let us know!
When are taxes due for crypto?
Crypto activity is reported on Form 1040, which is your normal income tax return. Tax returns are due on April 15; however, if you need more time you can file an extension, which gives you six more months to file your tax return and extends the filing deadline to October 15. (Please note that these dates may change slightly if the deadlines fall on a weekend or holiday.)
What happens if I miss the April 15th deadline?
If you aren’t able to file your taxes by April 15, the best thing you can do is to file an extension. This will give you until October 15 to file your taxes; however, it does not give you an extension on your tax payments. This means that if you owe taxes for the current tax year, you still need to make a payment (or at least an estimated payment) by April 15, or you will be subject to interest and the late-payment penalty. If you end up overpaying with your estimate you will receive a refund when you eventually file your tax return. It is important to file an extension whether or not you are making an estimated payment though, because filing an extension will make sure you are not subject to the late-filing penalty (which is 10x more than the late-payment penalty). If you need help filing an extension, let us know!
When is crypto income taxed?
The IRS states that you should recognize crypto as income when you have “dominion and control over the cryptocurrency so that you can transfer, sell, exchange, or otherwise dispose of the cryptocurrency.” This means that you may have income to report regardless of whether you have cashed out.
Does the wash sale rule apply to crypto?
As of right now the wash sale rule does not apply to crypto.
What is tax loss harvesting?
Tax loss harvesting is an easy way to save money on your taxes by selling off any coins you are holding at a loss towards the end of the year to offset any gains you may have.
My accounts are a mess. A lot of the exchanges I have traded on in the past are now shut down or gone. I have also had countless wallets over the years. Can you help me?
Yes, we have helped countless numbers of clients in this exact situation. During the reconciliation step of the process we are often able to fill in many of the holes in your data by looking through the blockchain, recreating data based on coin values, and matching up unmatched deposits and withdrawals. If you’re feeling overwhelmed by your crypto taxes, let us know and we can help you clean it up!
Seriously, my accounts are a mess. Are you sure it will be worth it for me to confront the trauma of my many questionable trading decisions?
Every cloud has a silver lining and the silver lining here is called capital losses. You can carry any capital losses you have booked from previous years indefinitely into the future. This means less taxes for you down the road. However, without a crypto report you won’t be able to claim them!
Do I have to report my crypto activity if I had a loss?
Yes, you will still want to report your losses to reduce your audit risk. You can also use your crypto losses to offset capital gains from other investments such as stocks, mutual funds, real estate, gold, etc. If you have a total net loss across all investments, you can deduct $3,000 per year against your total income, and roll the rest of the loss forward to future years.
What is the best way to save money on crypto taxes?
The most important thing you can do to reduce your tax bill is to first produce an accurate crypto tax report. This provides a solid foundation for any tax-reducing strategy. One of the most effective tax-reducing strategies is called “tax loss harvesting”. This is where you sell coins you are holding at a loss towards the end of the year in order to offset any gains you may have. We can provide reports to help you do this and also discuss other tax-saving strategies with you!
Do I have to pay taxes if I haven’t sold any crypto for USD?
Yes you may still owe taxes if you converted one coin to another coin. For instance selling BTC to buy ETH. Any sale of crypto is a taxable event!
I am a new client but I only need my crypto report done for this tax year. Why do you need to look at data from previous years?
The cost basis from coins you bought in previous years is carried over to future years. This means that previous year’s data may greatly affect future year’s data. Thus, it is important that we have an accurate report for all years that you were involved in crypto. This usually doesn’t mean a bigger bill for you. In fact, it usually means your final bill will be less when we can access your complete transaction history and assign a cost basis to all of your coins.
Do you only do crypto taxes for individuals, or do you do business taxes too?
Though the majority of our clients are individuals, we are able to handle your business taxes as well. We can help anyone with an LLC, S-Corp, or Partnership. At this time, we do not handle filing for C-Corps, trusts, or non-profits.
Do you accept crypto?
Yes, you can pay for any of our services with crypto!
What is the best way to save money on crypto taxes?
The most important thing you can do to reduce your tax bill is to first produce an accurate crypto tax report. This provides a solid foundation for any tax-reducing strategy. One of the most effective tax-reducing strategies is called “tax loss harvesting”. This is where you sell coins you are holding at a loss towards the end of the year in order to offset any gains you may have. We can provide reports to help you do this and also discuss other tax-saving strategies with you!
I have already had my crypto taxes done in previous years by another accountant. Can you just help me with this year’s report?
Potentially. We have seen many, many inaccurate crypto reports prepared over the years, so we would need to look over the previous years to confirm that they were done correctly. If you have a Cointracking or Koinly account with your transactions in it already, we can start from there! Sometimes starting from scratch can be the most cost-effective approach though.
