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It’s important to report any income from cryptocurrency on your taxes. Here’s a step-by-step guide on how to report crypto income using TurboTax.
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Introduction
This article will guide you on how to correctly report your cryptocurrency activity when filing your taxes with TurboTax.
If you have sold, spent, or traded cryptocurrency during the 2019 tax year, you will need to report this activity come tax time. The Internal Revenue Service (IRS) views cryptocurrency as property, not currency, which means it is subject to capital gains taxes.
To correctly report your crypto activity on TurboTax, you will first need to calculate your capital gains or losses for the year. This can be done by subtracting your cost basis (what you paid for the crypto) from the proceeds (what you sold it for). For example, if you bought 1 Bitcoin (BTC) for $3,000 and sold it later for $4,000, your capital gain would be $1,000.
Once you have calculated your gains or losses, you will need to assign a short-term or long-term designation to each transaction.Short-term transactions are those that were held for less than a year before being sold; long-term transactions are those that were held for more than a year. Short-term gains are taxed as ordinary income at your marginal tax rate; long-term gains are taxed at a lower rate of either 0%, 15%, or 20%, depending on your tax bracket.
After you have determined your capital gains and assigned a short-term or long-term designation to each transaction, you will be able to enter this information into TurboTax. If you are using the TurboTax software, you can find the appropriate section by searchi
What is cryptocurrency?
Cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
How is cryptocurrency taxed?
The IRS has not yet issued specific guidance on how cryptocurrencies should be taxed, but has said that virtual currencies should be treated as property for tax purposes. This means that any gains or losses from the sale or exchange of cryptocurrency will be subject to capital gains taxes.
If you have traded or sold crypto, you will need to report the transaction on your tax return. Here’s a step-by-step guide on how to report crypto on TurboTax:
1) Login to your TurboTax account and select “Add a Form”
2) Search for “1099-B” and select the appropriate form
3) Enter the date you acquired the crypto, the date you sold it, and your proceeds from the sale
4) Calculate your gain or loss from the sale using TurboTax’s tools, and enter the result on your tax return
What if I don’t report my cryptocurrency?
While cryptocurrency is still technically a new phenomenon, the IRS has already issued guidance on how it should be taxed. According to the IRS, cryptocurrency is treated as property for tax purposes, which means that any gains or losses from trading or selling it are subject to capital gains tax.
This means that if you bought Bitcoin for $10,000 and then sold it later for $11,000, you would owe capital gains tax on your $1,000 in profits. Similarly, if you bought Bitcoin for $10,000 and then it fell in value to $9,000, you would be able to deduct your $1,000 loss when you file your taxes.
Of course, if you don’t report your cryptocurrency trades or sales on your taxes, you could face penalties from the IRS. So even if you’re not sure how to report your crypto transactions on TurboTax, it’s important to at least try to do so.
How do I report cryptocurrency on TurboTax?
Since TurboTax Premier and TurboTax Self-Employed support cryptocurrency transactions, you can report your gains and losses from these activities on your tax return.
In order to do this, you’ll need to download your crypto transactions from each exchange you’ve used during the year. For instructions on how to do this, see the documentation for your exchange or visit the TurboTax Support page.
Once you have your transaction history, you can import it into TurboTax using the Import feature. To learn more about this process, see the TurboTax Support page.
Conclusion
It’s important to stay up-to-date on the latest tax laws, and that includes knowing how to report cryptocurrency on TurboTax. The IRS has been clear that crypto is taxable, so if you have made any gains or losses from trading or investing in virtual currency, you need to report it come tax time.
Luckily, TurboTax has made it easy to do just that. All you need to do is enter your transactions into the appropriate form and TurboTax will calculate your gains or losses for you. So, if you’re not sure how to report cryptocurrency on TurboTax, don’t worry – we’ve got you covered.
