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Filing your cryptocurrency taxes can be a pain, but TurboTax can make it a whole lot easier. Here’s a step-by-step guide on how to file your crypto taxes with TurboTax.
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Introduction
TurboTax is the biggest and most popular tax preparation software in the United States, and they now support cryptocurrency tax reporting. filing your taxes with TurboTax is relatively simple, and they have a dedicated team of customer support representatives to help you with any questions you may have.
In this guide, we will show you how to file your cryptocurrency taxes using TurboTax.
What You Need to Know About Crypto Taxes
If you invested in or traded cryptocurrency last year, you may be wondering how to file your taxes. That’s where TurboTax comes in. They make filing your crypto taxes easy. In this article, we’ll tell you everything you need to know about how to file your crypto taxes with TurboTax.
What is cryptocurrency?
Cryptocurrency is a digital or virtual asset that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrencies are decentralized and do not have a central bank or single administrator that can be held responsible for their actions. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods or services.
What is a capital gain or loss?
We’re going to start with the basics. When it comes to crypto, capital gains and losses refer to the profit or loss you realized when you sold or exchanged a virtual currency. If you held the asset for less than a year before selling, it’s considered a short-term gain or loss. If you held it for more than a year, it’s considered a long-term gain or loss.
What is an airdrop?
An airdrop is when a blockchain project distributes free tokens or coins to the crypto community. Airdrops are usually done to promote a new project, and they’re often done in conjunction with an ICO. For example, a new blockchain project might airdrop 10% of their total supply of tokens to ICO participants.
What is staking?
Staking is the process of holding funds in a cryptocurrency wallet to support the operations of a blockchain network. Essentially, it is a form of cryptocurrency investing. Most Proof-of-Stake (PoS) currencies require users to “stake” their coins by putting them up as collateral in order to validate transactions and produce new blocks (essentially, mining). If you participate in staking, you may be rewarded with transaction fees and/or new tokens for your contribution to the network. The amount of reward you receive depends on the specific currency and how much you have staked.
What is a hard fork?
In the cryptocurrency world, a fork takes place when a blockchain – the digital, distributed ledger that records all cryptocurrency transactions – splits into two paths. Forks can happen on purpose – as with Bitcoin Cash, which was created when original Bitcoin blockchain forked in two – or by accident (Ethereum Classic is one example of an accidental fork). A hard fork is a permanent splitting of the cryptocurrency into two separate versions, usually based on differences in how the currency should be run. Hard forks always create a new cryptocurrency.
How to File Your Crypto Taxes with TurboTax
Filing your crypto taxes doesn’t have to be complicated or expensive. If you use TurboTax, you can easily file your crypto taxes in a matter of minutes. In this guide, we’ll show you how to file your crypto taxes with TurboTax.
Step 1: Gather Your Crypto Tax Documents
Before you can begin filing your crypto taxes with TurboTax, you will need to gather all of the relevant documentation. This includes any exchanges or wallets that you have used throughout the year, as well as any records of earnings or losses.
If you have traded cryptocurrencies on any exchanges, you will need to provide documentation of these trades. This includes the date of the trade, the type of currency traded, the amount traded, and the price at which the trade occurred.
If you have earned income from cryptocurrency investments, you will need to provide documentation of this income. This includes records of any interest earned, dividends received, or capital gains realized.
If you have lost money through cryptocurrency trading or investments, you may be able to deduct these losses on your taxes. Documentation of these losses may include records of any trades that resulted in a loss, as well as records of any investments that have decreased in value.
Step 2: Enter Your Crypto Transactions Into TurboTax
Now that you’ve gathered your records, it’s time to enter your crypto transactions into TurboTax.
If you used TurboTax to file your taxes last year, simply log in and follow the on-screen instructions. If you’re new to TurboTax, select the “ tax return” option, then choose the type of tax return you want to prepare (e.g., 1040EZ).
Once you’ve logged in or created an account, follow the on-screen instructions to begin entering your information. When you get to the section about asset income, select “cryptocurrency” from the drop-down menu.
From there, you’ll be able to enter each of your cryptocurrency transactions. For each one, you’ll need to enter the date of the transaction, the type of coin (e.g., Bitcoin), the number of coins acquired or sold, and the price per coin in USD.
Step 3: Calculate Your Capital Gains or Losses
Now that you’ve assembled your cost basis information and gathered your records of all crypto transactions for the tax year, you’re ready to calculate your capital gains or losses.
If you sold, traded, or otherwise disposed of any cryptocurrency during the tax year, you will need to calculate your capital gain or loss from each transaction. To do this, you will need to know the following information for each transaction:
-The date you acquired the cryptocurrency
-The date you sold or traded the cryptocurrency
-The amount of cryptocurrency involved in the transaction
-The price you paid for the cryptocurrency (your cost basis)
-The price you sold the cryptocurrency for (the proceeds)
Once you have this information, you can use it to fill out Form 8949: Sales and Other Dispositions of Capital Assets. This form is used to report all sales and trades of capital assets, including cryptocurrencies. On Form 8949, you will need to report each disposition separately.
After completing Form 8949, carry over your total net capital gain or loss to Schedule D: Capital Gains and Losses. If you have a net capital loss for the tax year, it may be used to offset other capital gains or up to $3,000 of ordinary income. If your net capital loss is more than $3,000, it can be carried over to future tax years.
Step 4: File Your Crypto Taxes With TurboTax
TurboTax is the biggest and most popular tax filing software on the market, and it now supports cryptocurrency. You can now file your cryptocurrency taxes with TurboTax online, making it the easiest way to file your crypto taxes.
Here’s how to do it:
First, log in to your TurboTax account and select “Add a Form” from the drop-down menu. Then, select “Cryptocurrency” from the list of supported forms.
Next, you’ll need to enter your crypto-related income, gains, and losses into TurboTax. This includes any income from selling crypto, as well as any gains or losses from buying, selling, or exchanging crypto.
Once you’ve entered all of your information, TurboTax will calculate your taxes owed (or refund due) and file your return for you. That’s it! You can now rest assured that your crypto taxes are filed correctly and on time.
