Most crypto traders would admit that paying crypto taxes is as tedious a task as you can get. Reporting and handling your crypto taxes has always been a difficult endeavor. However, you ought to know that the Internal Revenue Service (IRS) has already set some guidelines for the public to file their crypto taxes.
The IRS made an official statement back in July 2019, where they stated they had mailed warning letters to upwards of 10,000 crypto traders who had not paid their taxes. They also issued a set of letters to crypto taxpayers who had not reported their crypto transactions properly.
According to the IRS, you could attract a hefty penalty or, in some cases, prison time, should you fail to pay your crypto taxes on time. Following this, numerous companies developed and released crypto tax calculators to help crypto traders ready their crypto tax reports.
How do you Report your Crypto Taxes?
Before getting on to the subject of crypto tax calculators, it is vital to understand when and how you should report your crypto taxes. Once you have your crypto-related information ready, make sure you fill up the IRS 8949 form.
You need to ensure this form consists of a detailed reported of all your crypto transactions. These will be verified with your capital gains and losses during the year.
The IRS form 8949 is a tax form that you, as a crypto trader, need to fill. You need to make sure you include every crypto transaction. This means you need to include all your sales, purchases, and trades along with the date and value of the purchase.
This will allow you to establish your Cost Basis and Fair Market Value. You need the Cost Basis and Fair Market Value to compute your capital gains and losses accurately. Once you do this, report your capital gain, and loss amounts on Schedule D. Schedule D is an attachment of the IRS form 8949.
Excellent Crypto Tax Calculators at your Disposal
There has been a rapid rise in the number of crypto tax calculators that are available today. Here are some of the best crypto tax calculators out there:
TokenTax is known to support every leading crypto exchange. It is a favorite for many crypto traders worldwide, and for good reason. It has a wide array of features to its credit, which is what cements its place as one of the best crypto tax calculators out there. Here are some of its most noteworthy features:
- TokenTax is capable of automatically producing tax forms like the 8949 form for tax returns.
- TokenTax can also help you seamlessly import your crypto data from all the exchanges it supports and fill in Form 8949.
- You can track your capital gains, capital losses, and all the other tax liabilities for each transaction that you perform.
- Additionally, this crypto tax calculator has to its credit, a tax-loss harvesting feature on its dashboard. You should have no problem checking your unrealized capital gains and losses.
ZenLedger is another impressive crypto tax calculator that ought to be on your radar. It has a plethora of useful features under its belt. Here are a few of them:
- ZenLedger is compatible with all the major crypto exchanges, cryptocurrencies, and traditional fiat currencies.
- It also integrates your crypto trading history flawlessly and produces the documents you need, like the donations report, closing report, income report, and capital gains report.
- In addition to this, it provides you with accurate profit and loss statements that your Certified Public Account (CPA) can make use of.
CryptoTrader.tax is a popular crypto tax calculator that you can use to calculate your capital gains or losses minutes after you import your crypto trader data. It also ensures you do not overpay your taxes.
This free crypto tax calculator generates completed tax forms that are in line with the IRS. It enjoys international tax support and is widely known for accurately calculating your capital gains and losses using traditional fiat currencies. The tax reports that it provides include the following information:
- Your crypto Income Report
- End of the Year Positions Report
- The IRS Form 8949
- Your long-term and short-term sales reports
- The TaxAct Direct Import Report
- A Crypto trader’s Audit Trail Report
CoinTracker is a household name for most experienced crypto traders. This free crypto tax calculator claims to be the solution you need for all your crypto requirements. Here are some of CoinTracker’s features:
- CoinTracker enables you to review your tax summary and download your completed reports that you require to file your crypto taxes on time.
- Integrating CoinTracker with TurboTax should be a breeze for you.
- It offers crypto traders a variety of options, including fee and margin trading.
- Finally, it gives you a performance tracker that you can use to get visuals on your crypto investment and portfolio management.
Never has there been a better time to take the leap and become a crypto trader. If you find yourself apprehensive about the idea of getting into the world of crypto, know that there are numerous options to choose from as far as cryptocurrencies, exchanges, and crypto tax calculators are concerned. Also, with all the information there is on crypto, it should not take you too long to get the hang of the subject.