Cryptocurrency information?

Forum|Forum|3 years ago
November 16, 2022
1 reply
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If I trade cryptocurrency and withdraw it for dollars, what information would I need to keep track of for when I file taxes at a later date?

Do you recommend any specific method or format to document that information?

What forms would I need to fill out when I file taxes?

What taxes would apply in this case, and what percentage of any money I made in a given year would go to taxes?

Is there anything else that would apply here, and if there is, what would I need to do?

DavidT0202

Level 5

Hi @assistanceneeded

Lets break down your questions:

If I trade cryptocurrency and withdraw it for dollars, what information would I need to keep track of for when I file taxes at a later date?

Most of this information should come to you on a 1099-B from your brokerage used to trade, buy and sell Crypto. You will want to make sure you know the Cost on the day you bought the Crypto, the price (In USD) the day it was traded, and the amount sold for.

Do you recommend any specific method or format to document that information?

I recommend either using an Excel Spreadsheet or QuickBooks for these transaction. Both work seamlessly together.

What forms would I need to fill out when I file taxes?

You will receive a 1099-B and a statement from your brokerage in the beginning of the year. You will need these. A lot of brokerages work well with TurboTax and allow you to download them directly to your return.

What taxes would apply in this case, and what percentage of any money I made in a given year would go to taxes?

Selling Crypto is like selling stock. You will be taxed at your capital gains rate which can be found HERE

Is there anything else that would apply here, and if there is, what would I need to do?

Be cautious when buying and selling Crypto. Holding assets for more then 1 year can lower your tax rate.

Thank you for choosing TurboTax!

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assistanceneededAuthor

Level 2

Thank you for answering my questions @DavidT0202 . After reading your response I have a few more, though.

As I understand it, the brokerage I use should store and automatically send me all of the necessary information at the beginning of the year, as well as the 1099-B form I need to fill out, which I may be able to send directly from the brokerage to my TurboTax account. However, I should still document how much I pay in dollars for every individual purchase of crypto I make, how much was bought, the date it was bought on, and the exact time it was bought. Every time I trade crypto I should also keep track of what the current USD price of the amount I'm trading is in the cryptocurrency I'm trading into at that time. So for example, if I was trading bitcoin for US dollar tether I would document how much US dollar tether was purchased in that trade, and the amount of bitcoin that was traded for that amount of USDT, as well as the date and time the trade went through. I should also keep track of any amount of USD I withdraw from the brokerage (including any fees added on to what I withdraw) and the date and time when I posted that transaction or the date and time it goes through. I should put all this information into an excel spreadsheet or a QuickBooks account, and store it there. I don't need to document any other information besides that. Is all of that right? If any of it is wrong in any way, please tell me.

My other question is related to the capital gains tax rate. The page you provided says "Note: Net short-term capital gains are subject to taxation as ordinary income at graduated tax rates." Does that mean I will also need to file my total capital gains from trading as income, or at a different tax rate? Or does that not apply in my case? Also is there any other information I need that I am missing in everything I have written in this reply?

DavidT0202

Level 5

@assistanceneeded

Is all of that right? - You Nailed it! That is all the proof you will need. Track it on your own and keep the documents from the brokerage. These two things should match at the end of the year.

Short Term Capital gains (Those investments held under a year) are taxable at your ordinary income level. Those can be found on this page: Here

When you put these items into TurboTax it will add it to your Income in the proper places. Investments held over a year will be taxed at capital gains rates and investment held under a year will be taxed at your normal rate according to income.

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