As cryptocurrency investments become more mainstream, many taxpayers wonder how they can quickly and accurately report digital currency transactions on their tax returns. Enter your newest tax-filing duo: TaxAct® and TaxBit.
What crypto means for your taxes
The IRS classifies cryptocurrencies, NFTs, and other digital assets as property for tax purposes.
As property, a taxable event is recognized when you dispose of the asset. This can happen in several ways:
- Selling crypto for cash
- Trading one digital asset for another (e.g., NFT)
- Using crypto as payment
The taxable amount is the market value at the time of disposal minus the amount you originally paid, also known as the cost basis. Depending on how long you held the assets, the amount will be treated as a short- or long-term capital gain or loss.
Additionally, you may have received cryptocurrency from mining, staking, airdrops, or payment for goods. This should be reported as income when received. The market value when received also sets the cost basis used to calculate gains or losses if later sold.
Per the IRS, tax filers should report all taxable digital asset activity on a Form 8949 whether or not the activity was reported on a Form 1099-B.
Automating your crypto tax forms with TaxBit
If this sounds daunting, TaxAct has partnered with TaxBit to make it easy.
TaxBit aims to make crypto tax and accounting as simple, affordable, and seamless as possible. It’s actually free for users of the most popular U.S. exchanges!
To get started, go to taxbit.com and sync your wallets and exchanges. With over 500 supported exchanges, connecting should be a breeze.
TaxBit’s software does all the heavy lifting. It automatically tracks cost basis, identifies taxable events, and calculates gains and losses. Nightmare avoided!
You’ll then be able to download a Form 8949 for each exchange to file your taxes. As a bonus, you can also track your gains and losses in real-time to lessen the chance of an unexpected tax liability come next tax season.
For a step-by-step walkthrough, checkout this article.
Filing your crypto taxes with TaxAct
Now that you have your Forms 8949 from TaxBit… what’s next?
Reporting your long- and short-term crypto gains and income is easy with TaxAct. Simply take the documents you downloaded from TaxBit and upload them to TaxAct’s secure site.
To make the process even more seamless, TaxBit and TaxAct now have a customized file format designed to save you time and ensure accuracy when uploading your tax documents.
When downloading your forms from TaxBit, you’ll see a dropdown menu of options. You’ll want to select “TaxAct CSV.” This will allow easy import of your information when e-filing with TaxAct.
TaxAct offers the trifecta that all taxpayers look for during tax season—simple DIY tax software that makes filing fast, easy, and affordable. We pride ourselves on helping individuals, business owners, and crypto investors file simple and complex tax returns with confidence.
Two partners, one crypto tax filing solution
With TaxBit and TaxAct working together, you get automated crypto tax forms, plus a low-cost tax prep service to help you file your return.
Both companies dedicate their time to helping taxpayers navigate crypto tax complexities with ease, accuracy, and affordability.
- The Benefits of Meal Prepping for Busy Moms - October 28, 2023
- The 11 Best Cash ETFs in Canada (Plus HISA ETFs and Money Market ETFs) - October 8, 2023
- Build a Variety of Outfits with These 7 Affordable Pieces - October 7, 2023