How To Track Crypto Trading For Tax Purposes

Although the IRS will be tracking crypto trading information via the brokers, all Investors are advised to also keep their records. Every investor should track all his potential taxable transactions and the crypto fair market price throughout these activities. This will help them ensure the accuracy of their tax report with the IRS. Here, we will show you how to track crypto trading for tax purposes.

How to Track Crypto Trading for Tax Purposes

Active traders and all investors should track their trading activities to maintain accurate tax records. But you cannot maintain an accurate track record if you don’t know how to. Below are the things you should do.

Record ALL Trade History

Crypto trade is more difficult to track because trades are made against different currency pairs, unlike in financial markets where trading is solely done against fiat currency. Since every trade is considered a taxable activity, it’s easier to track transaction records in the latter than the former. For instance, in NYSE, Tesla Stock (TSLA) is traded against the US dollar only. But in crypto, Ethereum on Binance can be traded against BTC, USDC, USDT, and even BNB, etc.

Hence, to make your tracking easier, go for an exchange that features transaction history and ensures you download regularly. You can then get the records through API or export them to CSV. This will give you a clear view of the amount transacted, and the price paid including the transaction fees.

Choose the Right Exchange

Most crypto investors are fond of having different accounts on various exchanges trading varieties of their crypto holdings on them. If you are in this sphere, go for exchanges with a track of successful operations and credibility. With the password manager, ensure you generate a very strong password that hasn’t been in use in other exchanges.

Always get up-to-date information on any exchange updates and upgrades.

Track Token sale and Mining Transaction Addresses

Crypto income earned while working as an ICO community manager or an affiliate for a crypto project is taxed differently. This includes those from various mining activities, the crypto (income) is deposited into your wallet often or one time.

It’s advisable to always keep track of these addresses, they are about 50 alphanumeric characters. These records will help you claim the fund as income with a separate and low-rate tax, unlike the short-term capital gains.

Prepare on Time to Avoid Mistakes and Fines

Effective tracking of your crypto trading for tax purposes may be difficult. This is the case when you combine it with monitoring and analyzing crypto projects for a profitable trade. However, it’s better to follow the rules using the right exchanges, getting the relevant transaction history and wallet addresses ready.

This habit will save you from spending on CPAs, you can calculate capital gains and file taxes with self-help tools. Getting ready in advance with all your transaction history will help you not to miss any trade. You won’t have to be penalized for paying additional interest on taxes you owe or pay for any tax amendment penalties.

Conclusion

Tracking your crypto transactions effectively will help you know exactly how much tax you will pay. It’s always safer and easier to use a reliable exchange where you can easily download your trading history and on time. Early preparation of the required IRS tax documents prevents you from paying any penalty.

Moreover, it’s safer to avoid pump and dump signals and don’t trade in a rush. Every trading activity is taxable; hence trade responsibly and not necessarily because there is volatility.

Leave a Reply

Your email address will not be published.

Related Articles
Read More

Canadian PM Decides To End The Use Of The Emergencies Act

Canadian Prime Minister, Justin Trudeau, recently announced that he will end the Emergencies Act, which was enacted after trucker-led protests swept through his country. With the Emergencies Act active, protestors' bank accounts were frozen, while their efforts to raise funds through different means such as...
Read More

Pakistan Central Bank Seeks To Ban Cryptocurrency

Central Bank Says Crypto is IllegalAccording to local media outlet SAMAA, a report submitted to Pakistan’s provincial court, Sindh High Court (SHC) has called for a ban on cryptocurrency. The 38-page report was submitted by the deputy governor of the SBP, Seema Kamil, to the...
Total
0
Share