Everything You Need to Know About Paying Taxes on Cryptocurrency: An Overview of Tax Implications
Everything You Need to Know About Paying Taxes on Cryptocurrency: An Overview of Tax Implications
Overview of Tax Implications:
Taxation is a complex and ever-changing subject, so it pays to stay informed on the latest developments in the area of taxation. Understanding how taxes are calculated and what tax implications may arise from different transactions can help you make sound financial decisions. This blog post will provide an overview of some key points to consider when it comes to understanding tax implications.
Income Tax:
The most basic type of taxation is that applied on earned income. Individuals and businesses must pay income taxes on their earnings, which are calculated by applying applicable rates to taxable incomes. Generally, higher earners pay higher rates, but there are also deductions and other factors that can reduce your taxable income amount. It’s important to understand how your income is taxed so you can plan for future payments and make sure you’re not overtaxed.
Capital Gains Tax:
Gains from selling certain assets such as stocks or real estate are subject to capital gains tax. This type of tax is generally assessed at a lower rate than ordinary income taxes but still needs to be factored into any calculations when considering potential profits or losses from investments. It’s important that you understand the basics of capital gains taxation before investing in order to ensure that you’re taking full advantage of any available exemptions or deductions available under the law.
Property Tax:
Property taxes are levied on real estate owned by individuals or businesses by local authorities based on assessed value of the property in question. The amount due will depend on various factors such as location, size and use of the property, so it’s important to research your local regulations before making any commitments related to purchasing property in a particular jurisdiction. Additionally, some jurisdictions offer exemptions for certain properties such as those owned by non-profit organizations or used for agricultural purposes – again, researching local laws will help ensure compliance with all applicable rules and regulations regarding this type of taxation.
Estate Tax:
Estate tax is imposed upon transfers made through inheritance or gifts upon death. Although not all estates are subject to taxation, those exceeding certain thresholds (which vary depending upon jurisdiction) may be liable for additional assessments depending upon their size and composition at the time transfer takes place . In addition , there may also be restrictions placed on lifetime gifts , which could restrict one’s ability to minimize estate tax burden . It’s important to research relevant laws prior engaging in any potentially estate -taxable activities . By understanding these rules beforehand , one can take appropriate steps toward minimizing potential liabilities when transferring wealth within one’s family .
VAT/Sales Tax:
VAT (Value Added Tax) or sales tax is typically charged at a percentage rate added onto goods purchased by consumers within certain jurisdictions . Depending where one lives , this rate may vary significantly between locations ; additionally , some items may be exempt from being taxed altogether while others may require special treatments due their unique nature . Understanding these rules ahead of time will help ensure compliance with applicable legislation while also helping one avoid unexpected costs associated with purchases made without considering sales tax implications first .
What is Cryptocurrency?
Cryptocurrency is a form of digital money that utilizes cryptography to secure and verify transactions. Cryptocurrencies exist on decentralized networks and are not issued or backed by any central authority, such as a government or bank. As such, they operate independently of traditional financial systems and can be used for a variety of purposes, from making payments to trading goods and services. The most well-known cryptocurrency is Bitcoin, which was created in 2009 by an anonymous individual or group known as Satoshi Nakamoto.
Cryptocurrencies use blockchain technology to maintain their ledgers, which consists of a chain of records that are publicly available. Each transaction is documented on the blockchain and validated by its network participants before being added to the ledger permanently. This makes it difficult for anyone to manipulate the data, since all changes must be approved by consensus among its peers. Additionally, cryptocurrencies offer users increased anonymity compared to other forms of payment due to their decentralized nature; however, this feature has been exploited by malicious actors in some cases.
As more people become aware of cryptocurrency and its uses, demand for these digital assets has grown exponentially. While some investors view them as speculative investments with potentially high returns, others view them as viable alternatives to traditional fiat currencies like the US dollar or Euro due to their low inflation risks and resistance to manipulation by governments or financial institutions. As such, many experts believe that cryptocurrencies could eventually become widely accepted forms of payment worldwide in the near future.
What are the Different Types of Cryptocurrencies?
Cryptocurrencies are digital currencies that are created and managed through the use of advanced encryption techniques known as cryptography. Cryptocurrency is a form of digital asset that is used as a medium of exchange for goods and services, similar to traditional forms of currency like fiat money. There are many different types of cryptocurrencies available on the market today with varying degrees of value and utility.
The most popular type of cryptocurrency is Bitcoin, which was created in 2009 by an anonymous person or group known as Satoshi Nakamoto. Bitcoin has quickly become one of the most highly valued digital assets in the world due to its limited supply and decentralization. Other popular types include Ethereum, Litecoin, Ripple, Dash, Monero, Zcash and Dogecoin.
Bitcoin is a decentralized blockchain-based cryptocurrency that uses peer-to-peer technology to facilitate transactions between users without requiring any middleman or intermediary. Bitcoin transactions are secured through public-private key cryptography which ensures that only the sender and receiver can view transaction details.
Ethereum is another popular type of cryptocurrency that was launched in 2015 by Vitalik Buterin and other developers on the Ethereum network project. Ethereum’s main purpose is to enable developers to build decentralized applications (dApps) using smart contracts on the Ethereum blockchain platform. It also allows users to create their own tokens (ERC20 tokens) for various purposes such as crowdfunding projects or creating loyalty programs for businesses.
Litecoin is an open source cryptocurrency released in 2011 based on Bitcoin’s codebase with faster block times and lower fees compared to Bitcoin transactions. Litecoin also utilizes a different mining algorithm called Scrypt compared to Bitcoin’s SHA256 which makes it more suitable for miners who don’t have access to powerful hardware resources like ASICs (Application Specific Integrated Circuits).
Ripple is a real-time gross settlement system (RTGS), currency exchange, remittance network developed by Ripple Labs Inc., based upon distributed ledger technology (DLT). The Ripple Network allows users to send almost any form of currency from one account holder to another without having any third party involved in the process; these transactions are secured using cryptographic algorithms which make them immutable and secure from malicious attempts at tampering or fraudulence .
Dash stands for Digital Cash and it was first launched in 2014 as XCoin before rebranding itself into Dash two years later; it’s an open source peer-to-peer cryptocurrency designed specifically for payments rather than store value like Bitcoin does; it utilizes masternodes which allow users who own certain amounts of Dash coins to vote on decision making within the network while providing additional services such as InstantSend or PrivateSend .
Monero is another open source privacy focused cryptocurrency developed back in April 2014; it differs from other cryptocurrencies because its main focus lies on privacy but still provides fast speeds when sending/receiving funds compared with other privacy coins such as Zcash or Verge; this feature makes Monero ideal for those looking for anonymity while transacting online .
Zcash is yet another decentralized open source digital currency based around cryptography; Zcash aims at providing complete anonymity when transacting funds thus protecting both parties involved from being identified publicly unlike other cryptos like BTC where all data associated with each transaction including sender’s address & recipient’s address can be seen even though they remain secured behind public/private keys ; this feature has made Zcash very attractive amongst traders looking for extra security when conducting their business online .
Dogecoin was created back in December 2013 based off a meme featuring Shiba Inu dogs but it quickly became one of the most popular cryptocurrencies out there due its low transaction fees & fast confirmation times ; dogecoins were initially intended just for fun but now you can use them just like regular fiat money making them quite useful depending on your needs .
How Does the IRS Know if You Own Crypto?
The Internal Revenue Service (IRS) is charged with collecting taxes from all taxpayers and ensuring compliance with the tax code. This means that the IRS has to be aware of all taxable income which includes income from cryptocurrency, such as Bitcoin and Ethereum.
The IRS uses various methods to track and monitor cryptocurrency transactions, including blockchain analysis. The blockchain is a digital ledger that stores every transaction ever conducted on a particular cryptocurrency network. By analyzing the blockchain, the IRS can determine who owns what crypto, when they acquired it, how much they paid for it and any related transactions made with it.
The IRS also requires taxpayers to report any gains or losses incurred through their crypto transactions when filing taxes each year. This can be done by reporting any profits made on crypto sales on Form 8949: Sales and Other Dispositions of Capital Assets forms. Taxpayers must also include information about their crypto holdings in their tax returns using Form 1040 Schedule 1: Additional Income & Adjustments to Income form.
In addition to tracking transaction data via the blockchain, another way the IRS knows if you own crypto is through its controversial John Doe summons issued in 2016 requiring Coinbase, one of the world’s largest exchanges at that time, to disclose its customers’ identities and trading activities between 2013-2015. Coinbase was forced to comply but ultimately only provided information for around 13000 accounts although Coinbase had over 5 million users at that time.
Ultimately, it’s important for all taxpayers who own or trade cryptocurrencies to understand their reporting requirements so they can stay compliant with tax laws and avoid hefty penalties from the IRS down the line!
How to Report Cryptocurrency on Taxes
The Internal Revenue Service (IRS) requires taxpayers to report any income, including cryptocurrency gains or losses, on their annual tax returns. This means that if you have earned, bought, sold or otherwise acquired any digital currency in the past year, it must be reported as part of your taxable income.
Fortunately, reporting cryptocurrency on taxes is relatively straightforward and there are a few steps you can take to make sure that process runs smoothly. Here’s what you need to know about reporting cryptocurrency on your taxes:
1. Understand the Tax Implications of Cryptocurrency Trading and Investing: Before you can accurately report your crypto gains or losses for tax purposes, it’s important to understand how the IRS classifies and taxes them. The IRS treats cryptocurrencies as property for federal tax purposes – meaning that when you buy, sell or trade cryptocurrencies you could potentially incur capital gains or losses which will need to be reported on your annual return.
2. Gather Your Records: Just like with other types of investments and financial transactions, record keeping is essential when it comes to reporting cryptocurrency activities for taxation purposes. You’ll need records of all trades made throughout the year as well as dates & amounts associated with each transaction. Additionally, records of any other crypto-related expenses such as mining costs should also be kept so they can be deducted from your total capital gains at tax time if applicable.
3. Calculate Your Crypto Tax Liability: Once all relevant records have been gathered it’s time to calculate how much tax needs to be paid based on your crypto activity over the course of the year. Depending on how often you traded digital assets this could involve calculating both long-term & short-term capital gains/losses (for transactions made within 1 year) or ordinary income rates (for assets held longer than 1 year). It may also involve deducting certain expenses related to mining or investing activities from total profits/losses in order to determine an accurate taxable amount owed by April 15th each year.
4 File Your Taxes: After calculating all relevant amounts due for crypto activities during the previous fiscal year taxpayers should file their taxes electronically using e-filing software such as TurboTax or H&R Block in order to avoid any potential penalties associated with late filing deadlines & incorrect amounts owed/paid for various forms 1040-EZ etc…
Following these four steps will ensure that individuals are properly reporting their crypto activities & taking advantage of available deductions when applicable in order minimize their overall tax liabilities each year while remaining compliant with IRS regulations & guidelines at all times!
How to Determine Your Crypto Cost Basis for Taxes
The recent surge in cryptocurrency prices has made it hard to ignore – and many of us have decided to jump on the bandwagon. But if you’ve started investing in digital currencies, it’s important to be aware of your crypto cost basis for taxes. Whether you’re trading Bitcoin, Ethereum, or other altcoins, understanding your tax liability can save you from a nasty surprise at the end of the year. Here’s what you need to know about how to calculate your crypto cost basis for taxes.
First, it’s important to understand that cryptocurrencies are treated as property by the IRS. This means that any gains or losses must be reported on your taxes just like stocks, bonds, and other investments. As such, you need to calculate your cost basis – which is essentially how much money you initially invested in a given coin or token – before calculating any gains or losses when filing your taxes.
When figuring out your crypto cost basis for taxes, there are two methods available: First In First Out (FIFO) and Specific Identification (Spec ID). FIFO assumes that when calculating gains or losses from sales or exchanges of coins or tokens, the first one purchased is assumed to be sold/exchanged first. Spec ID allows investors to specifically identify which coins/tokens they want to use as their cost basis when reporting their transactions on their tax return.
It’s also important to keep track of all transactions involving cryptocurrency so that you can accurately calculate all gains and losses when preparing your tax return. To do this effectively, consider using a reliable software solution such as CryptoTaxCalculator that will help automate this process for you and ensure accuracy with little effort required on your part.
Understanding how to determine your crypto cost basis for taxes is essential if you plan on investing in digital currencies over an extended period of time. By taking the time now to get familiar with these concepts and tracking systems such as CryptoTaxCalculator, you can save yourself from potential headaches come tax season!
The Tax Implications of Trading Crypto
Cryptocurrencies have become increasingly popular over the past few years, with a wide range of different digital assets now available for investors to trade and invest in. While many investors understand the general risks associated with trading crypto, there is often less understanding of the tax implications that come along with it. This blog post will provide insight into the various tax rules and regulations applicable to trading crypto and how you can stay on top of your taxes when investing in this exciting asset class.
The first thing to understand is that cryptocurrencies are considered property by the IRS and therefore subject to capital gains taxes. This means that anytime you sell or exchange a cryptocurrency for another one or for cash, you must report any profits as taxable income. Additionally, if your cryptocurrency holdings appreciate in value during the year, then you may be liable for taxes on those gains even if you don’t sell them.
In order to pay taxes on your crypto profits, you need to accurately track all of your transactions throughout the year. Luckily, there are several apps available which make this process much easier than manually tracking each transaction yourself. These apps allow you to link your wallet address and automatically track all incoming and outgoing transactions so that they can be reported at tax time.
Another important aspect of managing cryptocurrency taxation is understanding how different types of transactions are taxed differently by the IRS. For example, gifting cryptocurrency is subject to gift taxes while using crypto as payment for goods or services incurs sales tax obligations depending on where those purchases were made. It’s also important to note that losses incurred from trading cryptocurrencies may be used as deductions against other types of income when filing taxes – so it pays off (literally) to keep meticulous records!
Finally, it’s essential that all traders understand their local laws and regulations related to cryptocurrency trading as well as any applicable international laws which could affect their taxable liabilities across borders. Cryptocurrency taxation can be complex depending on where in the world you live, but understanding these rules can help ensure compliance with government authorities and save money at tax time too!
The Tax Implications of Mining Crypto
Cryptocurrency has been gaining traction as a viable form of currency, with more and more people investing in it every day. As an investor, you may be wondering how this digital currency is taxed and what the implications are for your finances. This blog will provide an overview of the tax implications of mining crypto – from income to capital gains taxes – so that you can make informed decisions when it comes to investing in cryptocurrency.
Income Tax: When you mine cryptocurrency, any profits or losses that occur during the mining process are subject to income tax. Generally, these profits are reported on your personal income tax return and are included as part of your gross income. However, depending on where you live and what type of crypto mining activities you’re engaged in, you may qualify for certain tax deductions or credits which could reduce your overall taxable income.
Capital Gains Tax: Cryptocurrency is treated differently than other assets when it comes to capital gains taxes. If you hold a cryptocurrency for longer than one year before selling it or exchanging it fo another coin, then any resulting gains will generally be treated as long-term capital gains and taxed at a lower rate than short-term gains (which are usually taxed at the same rate as ordinary income). On the other hand, if you trade within one year or less then any resulting gains will be considered short-term capital gains and taxed at a higher rate than long-term capital gains.
It’s important to note that each country has different rules for how cryptocurrencies should be treated for taxation purposes so make sure to research thoroughly before engaging in any sort of crypto mining activity. Additionally, if you’re trading large amounts of crypto then it’s wise to consult with an accountant familiar with crypto taxation laws in order to ensure compliance with all applicable regulations.
Reporting Hard Forks and Airdrops on Taxes
A hard fork is an event in the cryptocurrency world that occurs when a blockchain splits into two, creating a parallel chain with its own set of rules. This usually happens when there is disagreement about how the network should be run and the developers decide to go their separate ways. Airdrops are also a form of cryptocurrency distribution, except they’re not done through forks, but rather through giving away tokens directly to users.
When it comes to taxes, it can be difficult to keep track of all your crypto transactions, especially if you’ve experienced hard forks or received airdrops. The good news is that there are some helpful guidelines available that can help you report these types of events correctly on your taxes.
First off, it’s important to know that any crypto gained from either a hard fork or an airdrop will count as taxable income for the year in which you receive it. You should then calculate your cost basis for each coin (the amount you paid for them originally) and report any gains or losses accordingly on your tax returns. If you don’t know what your cost basis is, you may need to consult with an accountant who specializes in cryptocurrency taxes.
It’s also important to note that any coins received from either a hard fork or an airdrop are considered property by the IRS and will be subject to capital gains taxes when sold or exchanged for other cryptocurrencies or fiat currency. This means that if you sell or trade your coins within one year of receiving them, you’ll have short-term capital gains; if sold after one year has passed, then long-term capital gains apply.
Finally, make sure you keep detailed records of all transactions involving hard forks and airdrops so that come tax time you’ll have all the necessary information at hand for easy reporting on your return forms. Having this data readily available will make filing much simpler and less stressful!
Gifting and Donating Cryptocurrency for Taxes
The idea of gifting and donating cryptocurrency for taxes is becoming increasingly popular among crypto holders. Not only does this practice provide an opportunity to reduce the amount of taxable income, but it also allows individuals to give back to their communities in a meaningful way.
Cryptocurrency donations are unique because they don’t require the recipient to have a bank account or to pay any fees associated with traditional currency exchanges. Instead, these types of donations can be sent directly from one digital wallet to another, making them a more cost-effective option than other forms of giving. Additionally, as cryptocurrency continues to gain recognition and acceptance in the mainstream, it will become even easier for donors to make tax-deductible donations using cryptocurrency.
When considering how much you would like to donate in terms of cryptocurrency, it’s important for donors to remember that all crypto donations are subject to capital gains taxes just like other investments or assets. This means that if you have held your crypto holdings for more than one year prior to donation, then you may be able to claim an additional deduction based on the fair market value of your assets at the time of gifting. It is always recommended that you consult with a qualified accountant prior to making any major financial decisions involving cryptocurrency transactions.
In addition to providing tax benefits, donating cryptocurrency can also be an incredibly rewarding experience for both the giver and receiver alike. Donors can take pride in knowing they are helping out those less fortunate while recipients appreciate being able receive funds without dealing with any unnecessary delays or complications that may arise when receiving traditional currency donations.
Ultimately, if done properly gifting and donating cryptocurrency can be an excellent way for individuals looking minimize their taxable income while providing meaningful support within their community at the same time!
Understanding Capital Gains, Losses, and Deductible Expenses with Crypto
Cryptocurrency trading can be both rewarding and risky. When you invest in crypto, you may incur capital gains or losses, depending on the market conditions. Knowing how to properly manage such gains and losses is key to managing your overall investment portfolio. In this blog post, we’ll look at what capital gains and losses are, as well as how they can affect your taxes and deductible expenses related to cryptocurrency trading.
Capital Gains
A capital gain is the profit made when an asset’s value increases over a period of time. When it comes to cryptocurrency trading, capital gains usually come from buying digital assets at one price and then selling them at a higher price in order to realize a profit. Capital gains are typically taxed like any other type of investment income; however, the tax rate varies from country to country.
Capital Losses
On the flip side, a capital loss occurs when an asset’s value decreases over time. Just like with capital gains, these losses are often realized when buying digital assets at one price and then selling them for less than that amount in order to realize a loss. These losses can be used to offset future taxable income or potentially reduce current taxable income if you have enough of them on record for that particular year.
Deductible Expenses
When it comes to investing in cryptocurrency, there are certain deductible expenses associated with such activities that can help reduce your tax burden. These include fees charged by exchanges for trading or executing orders (e.g., commissions), costs associated with mining equipment (e.g., hardware costs), costs of attending conferences related to cryptocurrency investments (e.g., travel costs), and even certain legal fees associated with creating or registering an LLC connected with your crypto investments (e.g., legal counsel). It’s important to note that these deductions will only apply if they exceed 2% of your adjusted gross income – meaning any deduction below this threshold will not be taken into account for tax purposes unless specifically requested by the IRS or other relevant taxation authorities within your jurisdiction.. Additionally, any deductible expenses claimed must be done so accurately since mistakes could result in penalties from the IRS or other applicable government entities down the line!
Tax Tips for Keeping Track of Your Crypto Transactions
As cryptocurrency continues to gain traction and become more widely accepted, it’s important for investors and traders to stay informed about their tax implications. Crypto transactions are subject to taxation, which means that keeping accurate records is essential. Here are some tips for staying on top of your crypto taxes:
1. Track All of Your Transactions: Make sure you keep track of all of your crypto transactions, including any purchases, sales, exchanges and transfers. Record the date and amount of each transaction, as well as the type of cryptocurrency involved. This information can be used to calculate your total gains or losses when filing taxes.
2. Calculate Your Gains/Losses: It’s important to accurately calculate your capital gains or losses in order to properly report them on your taxes. For this purpose, you will need a record of all your buy/sell prices, including fees associated with each transaction. Additionally, if you held the currency for more than one year before selling it then you may qualify for long-term capital gains tax rates instead of short-term rates – so make sure to keep track of this too!
3. Stay Up-to-Date on Tax Laws: Cryptocurrency regulations vary from country to country – so make sure that you are always informed about changes in the law where you live (or trade). This will help ensure that you don’t miss out on potential deductions or get hit with unexpected taxes down the line due to new laws being passed or current ones changing in scope.
4. Estimate Your Tax Liability Accurately: A common mistake made by many cryptocurrency investors is underestimating their tax liability due to not taking into account all applicable charges like capital gains tax (CGT) and value added tax (VAT). Be sure that you accurately estimate your liability so that you don’t end up having an unpleasant surprise at tax time!
5. Use a Crypto Tax Software Solution: Fortunately there are now software solutions available which can help simplify the process of tracking and calculating taxes on crypto transactions – such as TokenTax or CoinTracker . These platforms provide users with easy access to comprehensive reports detailing their taxable income from trades as well as other helpful features like automatic importation from multiple exchanges and wallets!
By following these tips and making use of helpful tools like those mentioned above, investors can easily stay compliant with their crypto taxes while maximizing their investments!
Common Mistakes People Make when Filing Their Crypto taxes
Cryptocurrency taxes are becoming increasingly complex as the industry grows, and people are often unaware of the potential mistakes they can make when filing them. Here is a list of some of the most common errors that people tend to make:
1. Failing to Report All Crypto Transactions – Many people forget to include all their crypto transactions on their tax returns, either because they have made too many transactions or because they simply don’t realize that they need to be reported. This is especially true for those who use exchanges like Coinbase and Gemini, which allow users to trade multiple currencies. It is important to remember that all transactions must be reported, regardless of how small or insignificant they may seem.
2. Not Keeping Good Records – Keeping good records is essential when it comes to filing your crypto taxes. You should keep track of all purchases and sales, including dates and amounts, so you know exactly what needs to be reported and how much each transaction cost you in fees or other costs associated with it. You should also keep track of any expenses related to your crypto activities such as computer hardware or electricity costs if you mine cryptocurrency yourself.
3. Failing To Calculate Your Cost Basis Properly – One of the most common mistakes people make when filing their crypto taxes is failing to calculate their cost basis properly. The cost basis determines how much profit or loss you have made on a given transaction; it is essentially the amount you paid for an asset plus any additional fees associated with obtaining it (such as trading fees). Calculating this number incorrectly can result in an incorrect tax liability; therefore, it is important that anyone filing their crypto taxes takes time to ensure accuracy here.
4. Not Understanding the Tax Implications of Forks & Airdrops – Cryptocurrencies frequently undergo forks (splitting into two separate coins) or airdrops (free tokens issued by a blockchain project), both of which are considered taxable events by the IRS and must be included on your tax return accordingly. It’s important for taxpayers to understand these events so that they can accurately report them on their taxes; if not done correctly, this could lead to costly penalties from the IRS down the line.
Filing your cryptocurrency taxes correctly can be complicated but taking the time upfront will help ensure accuracy and save you from expensive fines later on down the line!
Conclusion: What You Need to Know About Paying Taxes on Cryptocurrency.
Taxes have been a hot topic in the cryptocurrency space ever since the IRS declared that cryptocurrencies are to be treated as property and not currency. This means that any profits made on cryptocurrency transactions must be reported as income, and taxes must be paid on those profits.
It is important for all cryptocurrency users to understand their responsibilities when it comes to paying taxes on their digital assets. While the process can seem daunting at first, taking the time to learn about taxes and familiarize yourself with the requirements for your specific situation can save you a lot of money in the long run.
The best place to start when it comes to understanding how to pay taxes on your cryptocurrency is by consulting with a qualified tax professional who is knowledgeable about digital assets. They will be able to provide advice tailored specifically for you, ensuring that you comply with all necessary procedures and regulations correctly.
Before getting started, make sure you have accurate records of all of your crypto-related activities over the past year (or since you began trading). This includes date bought/sold, purchase price, sale price, exchange fees, etc., so that you can accurately calculate any gains or losses incurred during each transaction. Additionally, if you’ve received any crypto payments or rewards from mining or staking activities within this period, these should also be noted down when filing your taxes.
Once all of your records are compiled into one document (such as an Excel spreadsheet), they should then be entered into Form 1040 Schedule D of your federal tax return form. You will need to calculate both short-term (held less than one year) and long-term capital gains/losses (held more than one year) from this data set which will determine whether or not you owe additional taxes due to trading activity within the calendar year.
While paying taxes on cryptocurrency may sound intimidating at first, taking some time upfront to properly track and report all applicable financial information can help ensure that everything goes smoothly in the end – saving money and reducing stress in equal measure!