Bitcoin.Tax – Declaring Tax on Cryptos in the U.S.
Oh yes, how we all love it, that cozy winter time when you have nothing better to do than to file your taxes. There are precisely two kinds of people on this earth when it comes to taxes: one that makes that tax stuff with ease and the other that want to kill their declaration paper with fire once they sit in front of it. Especially when you are a day trader in the US, it can become a real pain. An endless stream of painful hours and hours and hours. Some time ago, we recommended our favorite crypto portfolio tracker and wrote an extra post about its tax preparation abilities. However, some of you have already chosen a portfolio tracker and just want the option to export trades to TurboTax. TaxAct or simply present your tax advisor a convenient file instead of a messy list of unordered trades. We found a very nice solution for you: Bitcoin.tax – Let us explain what it is and how you can work with this tool.
Firstable, if you are below 100 trades per annum, you are perfectly fine with the free version of Bitcoin.tax – that’s pretty generous as many of the more hesitant traders can quickly get their tax stuff done without paying a dime!
Bitcoin.tax offers a lot of bang for the buck:
- You can choose from different cost-basis methodologies, including FIFO, LIFO, and average costing, as well as comparing like-kind treatment.
- You can create a Capital Gains Report, which shows each transaction’s cost basis, sale proceeds, and gain.
- If you are a miner, you can generate an Income Report for the calculated mined values.
- And of course, you get a closing report to present your net profit and loss, as well as the cost basis report.
- The capital gains report can be imported into tools like Turbotax or Taxact. Turbotax even offers an add-on, which reminds to a “Tax Audit Insurance” for just $45 (for the faint-hearted). It is called audit protection service and makes Turbotax taking care of your case if you are audited.
If you think now, “I just hodl my cryptos, didn’t convert back to fiat -> smart me has not to declare anything!” – we have to put you down, as you are not only taxed when cashing out to fiat. Thanks to god-like Trump you are now taxed as a percentage of your realized gains! Means Uncle Sam officially owns a % of your direct profits each and every time you sell a coin or token in profit. But it gets even better – imagine you sell your $XLM after a cute 50% profit, and you then decide just to hold your freshly converted Bitcoin – yes, the worst thought that just came up is right – the $ – gains made by hodling BTC are taxable as well. You are literally f#cked over the table back and forth. And you should not postpone that process as an amended return is something you don’t want to go through. Only death and taxes…
How to use Bitcoin.tax?
To make use of the platform you have to log in to your exchange and export your trades. For example, with Bittrex you open up your order history page and click on “LOAD ALL” below the completed headline. This will generate you a CSV file and download it to your computer. Open it with Excel or Numbers and remove all the items before and after taxable year.
To get the needed .txf file for Turbotax, you now upload the file into Bitcoin.Tax (you also can use the API connection, though it is a bit tricky as you have to implement Google Authenticator first to your account). Once uploaded you head to Reports & Export -> Download -> Turbotax CD/Download. You should get now that needed .txf file.
Now open Turbotax and visit the Feder Taxes section. Look for Wages & Income -> Investment Income -> Stocks, Mutual Funds, Bonds, Other. Confirm that you have a 1099-B and upload the generated .txf file. That’s it – with the help of Bitcoin.tax and Turbotax you should now have everything needed ready. Man, that was pretty quick. If you are still unsure about doing this yourself, the Bitcoin.tax website has also a section, which recommends tax accountants, who know about crypto and can help you with their competence – a convenient place for everyone that is in search for bitcoin/crypto tax professional (those are still pretty rare).