Welcome to our latest crypto tax discussion. Today, I’m stepping out into the beautiful Nebraska sun to shed some light on a critical aspect of cryptocurrency taxes: what you need to provide your accountant or tax preparer when you’re not going the DIY route or using TurboTax. Let’s dive into the details.
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The Crypto Tax Preparation Process
When helping our clients manage their crypto transactions for tax purposes, our primary goal is to ensure that all the numbers tell the right story. We do this by meticulously cleaning up the data, making sure nothing is missing, and ensuring that every crypto asset has a cost basis. Once everything is in order, we utilize specialized software to generate a tax report.
1. Tax Report Generation
The software we use simplifies the process. You click a button and it runs a tax report. This report is the foundation of what you’ll hand over to your accountant or tax preparer.
2. Information for Accountants
When it comes to sharing this report with your accountant, here’s what you should do:
a. PDF Reports
The tax report generates a PDF report that details your crypto transactions and income sources. It’s important to understand that different types of crypto income (e.g., mining, interest) are reported in specific sections of your tax return. These PDFs often specify where to input this information, which can be helpful for both you and your accountant.
b. Pre-Prepared Forms (For US Taxpayers)
For those in the United States, the software goes a step further and provides pre-prepared forms like the 1040, Schedule B, Schedule D, and 8949. These forms are essential for reporting your cryptocurrency activities correctly.
c. What Your Accountant Really Needs
Most accountants have their own tax software, which takes the numbers you provide and automatically fills out the required forms. Therefore, you do NOT need to hand over the pre-prepared tax forms. Providing them with a summary of your various crypto income and the list of your trades for your form 8949 is usually sufficient.
The Crux: Reporting Crypto Trades
Now, let’s address the heart of crypto tax reporting—the trades. Every time you exchange one cryptocurrency for another, you trigger a capital gain or loss. In the United States, this information is reported on Schedule 8949.
The software allows you to download a CSV file with all your capital gains transactions. The format is easy for your accountant to work with. However, the choice between downloading the detailed PDF report or the CSV depends on the number of transactions you have.
Summarizing by Coin
To simplify matters, especially if you have numerous transactions, it’s often advisable to summarize your trades by coin. This means grouping all purchases and sales of a specific cryptocurrency into a single line for short-term and another for long-term gains and losses. This approach significantly reduces the volume of data and makes the reporting process smoother, not to mention reducing the number of pages needed for your tax report!
Expert Guidance Matters
Cryptocurrency taxation can be intricate, and not all accountants are well-versed in its nuances. That’s where we come in. Our role is to ensure that your crypto transactions are accurately and comprehensively prepared for tax reporting.
We scrutinize every detail, ensuring your taxes tell the correct story. Whether it’s clarifying the tax implications of different crypto transactions or handling complex scenarios like rebasing coins, we’ve got you covered.
Get in Touch
If you have questions about your crypto taxes, don’t hesitate to reach out. You can catch us live on Facebook every Tuesday and Thursday at 4 p.m. Eastern or on Saturdays at 10 a.m. where we discuss crypto tax strategies, you can access our FB page here. Feel free to message us with your inquiries or drop an email at Jessica@BetaVirtualAssistance.com.
You can also reach out to us for any assistance with your crypto taxes. Book a call here.
Now, I’m off to enjoy the sun before my next commitment. See you later, crypto enthusiasts!
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Did you read our previous post about crypto taxes titled: “The Surprising Truth About Crypto Losses and Tax Savings“