Things to keep in mind before the tax deadline

Hey friends, since the tax deadline is approaching, I put together this Q&A answering some common questions I had when I first started in crypto.

Before we get started I do want to share a disclaimer that I’m just some guy on Reddit and you should definitely do your own research before making any kind of tax or financial decision.

Do I really need to report my taxes?

Reporting your taxes is the safe move if you use centralized exchanges and want to avoid trouble from the IRS in the future.

If you’re using a major exchange like Coinbase or Kraken, you should remember that you gave away all your personal information during the signup process. These platforms send 1099 forms to the IRS and have in the past shared customer information with the federal government after being served a John Doe Summons.

Do I still need to report taxes if I lost money on crypto?

If you realized a loss on crypto in 2022, you can actually save money on your taxes. Capital losses can offset gains and up to $3,000 of income.

What info do I need to report my taxes?

You need the following information on each of your crypto transactions to accurately report your capital gains and losses.

• The type of cryptocurrency
• The amount of crypto involved in the transaction
• The price of crypto at time of receipt
• The price of crypto at the time of disposal
• The date you received your crypto
• The date you disposed of your crypto

Collecting this information can be tough if you’ve used decentralized wallets like MetaMask during the year. In this case, you might want to use crypto tax software (more on this later).

Should I file an extension?

If you haven’t made any efforts to file your taxes yet and you’re panicking, filing an extension might be the best move.

To file for a tax extension, you should fill out Form 4868 before the tax deadline. This way, you’ll have until October 16 to file your taxes.

You can submit this form online.

It’s important to remember that you’re still required to make a tax payment by April 18th even if you file for an extension (it’s the IRS, did you think they were going to be cool about it?). If you overpay, the IRS will send you your money back. If you underpay, you’ll owe the IRS your shortfall (plus interest and penalties).

It’s also important to remember that you shouldn’t procrastinate even if you file for an extension. You should get started getting a record of your transactions so that you’ll be fine once it’s October.

Do I need crypto tax software?

Honestly, you probably don’t need crypto tax software if you only have a few transactions for the year or you only used one exchange the entire year. However, things get complicated when you have multiple transactions across multiple exchanges.

For example, if you transferred your crypto from Coinbase to Gemini or from Coinbase to MetaMask, it may be hard to keep track of your capital gains and losses. In this case, the tax forms you get from your exchange won’t help you file your taxes (remember, they only have information on transactions that take place on their platform).

In cases like these, you might want to get started with crypto tax software that can integrate with your wallets and exchanges and pull the information you need to file your taxes automatically. There are tons of good options out there (CoinLedger, CoinTracker, and many more).

Thanks for reading y’all! Hope this is helpful.