How to file your crypto taxes?
Investors must calculate their net gain or net loss before choosing their filing status, deciding how they will file their taxes, determining if they are taking the standard deduction and making a payment if it is owed.
To file their taxes, users may start calculating their gains and losses manually or by consulting a tax-planning professional. Capital gains and losses incurred by an individual investor require completing IRS Form 8949. The total gains and losses are combined, arriving at either a net capital gain or a net capital loss. This amount is then added to an investor’s total income from the rest of their investments, such as stocks, into form 1099-B. A tax professional, CPA or software filing solution will use the information provided on this form to generate Form 8949.
In most cases, exchanges will report 1099-B Forms for cryptocurrency trading transactions, which investors can match with Form 8949. Issues only arise when there are discrepancies in values, resulting in audits or a CP2000 notice.
With the completion of these calculations, investors may undergo the rest of the standard steps involved in filing their taxes. These steps include determining the filing method (the IRS typically recommends tax preparation software to e-file), deciding between a standard deduction or itemized return and making a payment if it is applicable.