This is a guide for New/low level traders (<$50000) on filing Personal Income tax with profits made from cryptos. "Why turn it in", you may ask. Although these currencies offer top line anonymity. However accounts at exchanges are less secure and private.
##Uncle Sam Wants to be Paid
The government is beginning to crack down.
Congress has passed tax reform that eliminates the "In Kind Exchange" loophole. The law also made ALL transactions of crypto a taxable event, not just exchanges to fiat.
The IRS have begun using legal action to find out who's not paying. In November of last year, a federal judge in San Francisco helped them. He ruled that Coinbase, the popular crypto exchange site, must turn over identifying information on users with $20,000+ in transactions a year from 2013-15. Information from over 10,000 accounts went to the IRS.
All that, happening in just Nov-Dec, says they're serious. I wouldn't wanna test them right now, soo...
##Now To Your Taxes
You will need two forms.
Form 8949
Schedule D
For those who just began last year, adding this income to your taxes is fairly simple. To get started gather all your purchase and sale receipts from 2017. Find them either in saved receipts or transaction histories at your exchanges.
We will start with form 8949.
We need Part 1 only. Short-term.
Fill out the top, then check box C.
On your purchase orders, locate the amount spent on the coin without fees. Add up this number from every purchase. This is your Cost Basis. Write this number in column e.
Next, add all your sales numbers and place the total in column d.
Take the number in D and subtract the number in E. Place this number in H. This is your gain or loss for the year. Fill out column a, b, and c then carry your numbers in e, d, and h down to the total area.
Next, go to your schedule D.
Fill out out the top, then carry over your totals from form 8949 the the appropreate column IN LINE 3 Then carry H down to Line 7, 13, and 16. Next check yes on line 20.
From here your 1040 will need completed along with Qualified Dividends and Capital Gain Tax Worksheet to determine your tax debt.
That's the basics. If I missed something let me know. I hope the IRS plays nice.
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