As the popularity of cryptocurrencies increases, so does the amount of taxation and regulations around it. With tax agencies across the globe including the IRS recognizing crypto as ‘property’ and requiring declarations of all transactions and gains from crypto to be declared, you need to track and manage your transactions efficiently. This helps you to stay in compliance and allow any issues with the taxman. With that objective, we have compiled 5 tips to help you to make tracking and reporting of your crypto transactions easier.
Understand Crypto Transactions
The first thing to know before reporting your transactions is what’s not required. If all you have ever done with crypto until now is buy and hold- then you are not liable to report anything. If you fall under the category of ‘holdall’, which means buying and selling- not using or exchanging crypto, then you do not need to report it to the IRS (yet!).
Bookkeep Crypto Transactions
As you buy any crypto, make sure that you record the date as well as the price you brought it from. On the day of redeeming the crypto (sale, exchange, or paying for services) you must again note the date and price. These dates and prices will be important to calculate your gains/losses as well as whether they were short-term or long-term gains. Since crypto is considered as property, both the parameters are important.
Review Crypto Transaction Losses
One of the most important aspects of crypto being considered as a property is that you can also write off any losses that you may have. The prices of cryptocurrencies can go up or down- and the IRS does acknowledge this. With crypto, you can write off any losses up to $3,000. This is helpful to lower your overall tax liability.
Keep Track of Crypto Regulations and Legislations
Crypto regulations are still in their infancy. Due to this, the rules and tax laws surrounding cryptocurrencies will see a lot of changes and additions over the next few years. Thus, you must keep yourself updated with all the latest regulations so that you can record and report transactions accordingly.
Sign Up to Crypto Tax and Portfolio Tracking Tool
Manually recording and reporting all your crypto transactions can be quite cumbersome. Most crypto exchanges have reporting functionalities and add-ons that can help you with that. The more you automate your transaction reporting and recording requirements, the easier and more accurate will it be for you to stay compliant. Thus, cut out the manual work and use a robust quality and analysis tool for your crypto needs.
With these 5 tips, you should be good to start on your crypto compliance journey. It may seem a bit overwhelming at first- but with the right start and accointing.com on your side, you will easily meet all regulations and have an efficient way to report your crypto transactions. Accointing.com helps you to track, manage, and report all of your crypto transactions from one place to make it all hassle-free and accurate.