Investors looking for a solution to get their crypto taxes done by the April 15 deadline can relax with the CoinTracking Full-Service, a complete solution to have their crypto taxes done.
IRS Zeroes In On Crypto With Several Requirements
The US was one of the first countries to introduce a full-on tax code for cryptocurrencies back in 2014, with several iterations in recent years, given the new trends that emerged in the digital realm.
The tax authority in the US, the IRS, classifies cryptocurrencies as property and taxes their use, from trading to earning income. Despite hefty taxes on cryptocurrencies, the US registers the highest crypto activity (e.g., raw volume) worldwide, and the most popular crypto companies spark from there.
The IRS has been attentively following the rise of cryptocurrencies in the US, reflecting that in their several notices since 2014 with warnings, new guides (e.g., Non-fungible tokens, staking), and crypto questions on tax forms.
US citizens have become more aware of cryptocurrencies, with, for example, the inclusion of the famous “crypto question” in IRS tax forms, where taxpayers have to reply if they interacted with crypto or not during the tax year. Even citizens who have not interacted with crypto have to answer this question in their tax returns.
Beyond this question, taxpayers dealing with cryptocurrencies have many more reporting requirements to be fully tax-compliant.
Hefty Taxes on Cryptocurrencies For US Investors
Cryptocurrencies are taxed very differently based on the type of transactions that took place, and the taxpayer needs to fulfill specific requirements for the tax reporting by using special tax forms.
Cryptocurrency trading is a taxable event in the US, subject to capital gains, with the tax rate depending on the holding period of the initially bought cryptocurrency.
Taxable events for crypto trading include any crypto-to-FIAT trades (e.g., Bitcoin to USD) and crypto-to-crypto trades (e.g., Bitcoin to Ethereum). Trading crypto for an NFT is also a taxable event in the US subject to capital gains taxes.
The capital gains tax rate will depend on the holding period of the acquired cryptocurrency. If investors hold crypto for over 12 months before selling it, they would be eligible for a long-term capital gains tax rate, ranging from 0% to 20%. Investors who only hold their crypto for less than 12 months would face higher taxes, with a short-term capital gains tax rate ranging from 10% to 37%.
Investors have the obligation to report all of their capital gains/losses from crypto on tax forms like Form 1040, Form 8949, and Schedule D.
Many other transactions in crypto are also taxed but at an income tax level instead of a capital gains tax level. Crypto-earning activities will fall under this category and include:
- Earning crypto interest (e.g., new coins) from interest vehicles;
- Earning staking rewards (e.g., ETH staking);
- Receiving a salary in cryptocurrencies;
- Receiving a payment for contract/freelance work in digital assets;
- Receiving airdropped tokens;
- Earning new coins from a hard fork;
- Selling NFTs as a creator.
Under these scenarios, investors need to determine the Fair Market Value (in USD) of all the batches of new coins they receive. This may be hard to do given the novelty of the received coins and the lack of proper market tracking data.
Nevertheless, investors still must report this income. To do it, they need to add all the income they earned from crypto-earning activities to their total income for the year and report it in their income tax return (Form 1040). The tax rate on the income will depend on the tax bracket that investors fall under.
Consequences For Not Reporting or Misreporting Crypto
What happens if investors don’t report crypto on their taxes? There are several reporting requirements for investors dealing with crypto, even if they didn’t make any gains.
The IRS and other tax authorities have all the resources, from agents to forensics tools, to discover crypto holdings from US investors and enforce the payment of crypto taxes.
For example, crypto exchanges and other brokers operating with US investors can be required to reveal their customer information to authorities like the IRS, making it even easier to go after investors who don’t report or pay their crypto taxes.
There are also efforts from tax authorities to make the sharing of investors’ information easier across countries and increasing the workforce of departments coming after investors who evade taxes.
If investors don’t report their crypto taxes, they face penalties and fines that can increase over time or face harsher consequences, potentially even jail time.
Investors who have made mistakes reporting their crypto taxes can file amended tax returns (e.g., Form 1040x) with the correct information to settle the situation. The easiest way to avoid fines and other severe consequences is to track crypto holdings and report gains and income each tax year.
Crypto Tax Software To The Rescue
Investors in the US must report their crypto taxes. There’s no way around it. However, they can make their lives easier by utilizing the best solution on the market to save time and get the best output possible: crypto tax software.
With a crypto tax tool like CoinTracking, investors can do their crypto taxes in three simple steps:
- Importing crypto trades from hundreds of data sources: crypto exchanges,wallets and blockchain networks;
- Tracking gains/losses and income with CoinTracking’s 25+ advanced reporting features;
- Generating tax reports with gains/losses and income that investors can file in the US.
Even if taxes were not an issue, investors would still benefit from having their crypto in a portfolio tracker to analyze their strategies and optimize their returns.
On the tax side, crypto tax tools like CoinTracking can even save investors money by optimizing their holdings and ensuring that they can generate tax reports according to the accepted accounting methods in the US (e.g., FIFO).
With CoinTracking, investors easily see which coins in their portfolios could be eligible for a lower tax rate based on their holding period, given the benefit the US offers to long-term-oriented investors (i.e., holding crypto for over 12 months before selling it).
CoinTracking offers 25+ reporting features that can help investors with more than just crypto tax compliance. There is also one more way to make crypto taxes in the US even easier.
Full-Service Takes the Crypto Tax Burden Out of Investors’ Hands
With the complexities of the US tax code, the multiple requirements put on the shoulders of investors, and the lack of time that investors have to take care of their crypto taxes, only a hands-off solution can be even better than crypto tax software.
That unique solution is CoinTracking Full-Service, now live in the US to support investors in getting their crypto taxes done without low to no effort from their sides.
With all the changing requirements, complying with rules and making sure that the information on tax reports is correct becomes more and more challenging, but not for the CoinTracking experts and partnering crypto tax professionals in the US.
With the CoinTracking Full-Service, a team of experts and experienced crypto tax accountants review investors’ accounts, fix any errors, propose improvements, and ensure investors can generate error-free tax reports.
Several Packages Suited to Your Crypto Tax Needs in the US
CoinTracking Full-Service is available in 25+ countries, including the US, where hundreds of busy investors have done their crypto taxes with this service in recent years. There are several packages available suited to different levels of complexity, including:
- Onboarding Call
- Premium Support
- Express Account Service
- Basic Account Service
- Advanced Account Service
- Crypto & US Tax Return Service
- Audit Defense Membership
Investors looking for a quick fix with their CoinTracking account can clarify doubts and get personalized insights with an onboarding call or select the premium support service from the team.
The onboarding call gives a 30-minute face-to-face meeting with the team of experts to answer any questions. The premium support is the best solution for those looking to understand better how to use the CoinTracking software and troubleshoot common issues.
Is the tax deadline right around the corner? The best solution is to go with the Express Service, which prioritizes importing investors’ transactions while enabling them to generate an error-free tax reports.
The Basic account service offers similar benefits for investors, who have less time and a portfolio of up to 5,000 transactions. If investors have a higher degree of complexity and a number of transactions, from DeFi to staking or NFTs, they should look into the Advanced Account Service.
For a completely hands-free solution for their US crypto taxes, the Full-Service covers everything, from tracking transactions to preparing tax reports, done by professional crypto tax CPAs in the US. CoinTracking’s certified crypto accountants do the necessary tax calculations for investors and prepare their current and/or prior (past due or amended) tax returns.
Full-Service is a great option for investors who have a large number of trades, several transaction types, and not a lot of time to be sure they’re complying with every tax rule regarding crypto. Investors can leave that part to the CoinTracking team and focus on what they do best: realizing crypto gains.
To get more peace of mind throughout the year, investors could sign up for the Audit Defense Membership, in partnership with CryptoTaxAudit, where IRS audit experts provide the account monitoring and protection investors need to defend their rights.
“Full-Service targets the specific needs of US crypto investors while simplifying the entire crypto tax season with a hands-off process”
- Dario Kachel, founder and CEO of CoinTracking.
Readers are encouraged to check out Coin Bureau's CoinTracking Review to learn more.
About CoinTracking
CoinTracking is the leading cryptocurrency tax software and portfolio tracker, supporting over 1.5 million customers worldwide.
With CoinTracking, investors can import their crypto transactions, track their crypto gains/losses, generate tax reports, and much more.
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Press contact:
Agnieszka Mojsiej
Marketing Manager, CoinTracking
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