Blog Information

• Posted By : descrypt app
• Posted On : Apr 01, 2023
• Views : 75
• Category : General
• Description : Descrypt can significantly reduce the stress of tax season through automation.

Overview

• Cryptocurrency investment is increasingly being seen as an unmissable asset class and gaining legitimacy. With this increased popularity comes the need to report gains and losses for tax purposes. One crucial aspect of reporting these gains and losses is the IRS Form 8949. This form is specifically designed for investors who must report capital gains or losses from selling or exchanging property, a group that now includes cryptocurrency. If you're a crypto investor, this post will walk you through completing Form 8949.

  Requirements for Filing Form 8949

  To file Form 8949 for cryptocurrency transactions, investors must report any sales, exchanges, or dispositions of cryptocurrency, including instances where cryptocurrency is used to purchase goods or services. Transactions of  less than $200 are exempt, and no reporting is required. However, transactions exceeding this amount must be reported.

  Please note that the information provided is for educational purposes only. You should always consult a qualified tax professional for accurate and up-to-date guidance on how to fill out Form 8949. This will ensure misunderstandings and errors will not arise, especially from laws specific for your area of residence.

  How to Fill Out Form 8949

  Once you've determined that you must report your crypto transactions on Form 8949, the next step is filling out the form accurately and completely. Here's a step-by-step guide to help you navigate the process:

   

  1. Start by downloading a blank copy of 8949 tax form from the IRS website.
  2. Enter your personal information, including your name, social security number, or taxpayer identification number, and the tax year you are filing for.
  3. Identify the asset being sold or exchanged by filling columns (a) and (b). In column (a), you'll list the name of the asset, such as "Bitcoin" or "Ethereum." In column (b), you'll list the date you acquired the asset.
  4. In column (c), list the date you sold or exchanged the asset.
  5. In column (d), enter the proceeds from the sale or exchange. This includes any cash or cryptocurrency you received due to the transaction.
  6. In column (e), enter the cost basis of the asset. This is the asset's original purchase price plus any additional costs associated with acquiring or holding the asset, such as fees or commissions. If you acquired the asset through mining or staking, your cost basis is the asset's fair market value on the date you received it.
  7. In column (f), calculate the gain or loss from the transaction by subtracting the cost basis from the proceeds. If the result is a positive number, you have a capital gain. If the results are in negative figures, you have a capital loss.
  8. Repeat this process for each transaction you need to report on Form 8949, and make sure the total gains and losses are accurately calculated and reported on your tax return.

  It's important to take your time and fill out 8949 tax form carefully to avoid errors or discrepancies that could trigger an internal revenue service audit or result in an incorrect tax bill.

  Common Mistakes to Avoid

  While filling out Form 8949, it's crucial to avoid common mistakes that can lead to internal revenue service penalties. Common mistakes include incorrect reporting, missing information, and failure to attach Form 8949 to your tax return. It's also important to double-check all entries to ensure accuracy.

  How to Descrypt Crypto Transactions on IRS Form 8949

  The IRS requires taxpayers to report all cryptocurrency transactions. However, tallying these transactions can take time and effort, and the manual data entry processes are prone to error. Descrypt is an essential platform that can help investors improve their reporting accuracy.

   

  By automatically tracking all crypto transactions, traders can rest easy knowing they have accurately provided the relevant information to file their taxes accurately. Connect your wallet or exchange accounts directly to Descrypt, and the platform will generate a comprehensive report that includes all the necessary details for filing Form 8949.

  Wrapping Up

  Filing taxes for crypto investments can be complex, but understanding how to complete Form 8949 is crucial. This blog post provides a comprehensive guide to understanding and completing Form 8949 for crypto investors. This is a complex form with little room for error, and traders need to become familiar with this process.

   

  Descrypt can significantly reduce the stress of tax season through automation. By giving accurate reports to investors, managing capital gains tax liabilities has never been easier nor safer. Click here and connect your wallet or exchange to Descrypt to generate your most accurate crypto portfolio and transaction report.