5 tips for simple crypto tax reporting


We’ve conjured up five ever-important cryptocurrency tax tips to get your crypto taxes in top shape, way ahead of the new accounting year. Whether you want to learn how to track your trades or know what kind of crypto transactions you should be claiming on your tax report, read our pointers below.

Tax reports for cryptocurrency investments can often be troublesome and difficult to create. We’re here to make the whole process easy and efficient. We recently announced our partnership with CryptoTax - making your crypto tax reporting easier than ever. In this article, we provide you with five tips that will help you keep your crypto tax reports in fantastic shape and help you get in Mr Tax Man’s good books.

1. Report taxes on your cryptocurrency investments

Financial authorities around the world are increasingly keen on collecting taxes from cryptocurrency trades and investments. More and more exchanges require their customers to fully verify their identity (KYC) upon registration and can, in specific cases be forced by law to report their users’ data to tax authorities. With the recent Financial Action Task Force (FATF) requirement crypto exchanges worldwide will have to collect and pass user data latest by June 2020. Even countries like China, Hong Kong, Singapore, Russia and Brazil are FATF members and will implement FATF rules on crypto exchanges in their jurisdictions.

2. Track all your crypto trading activities

Always keep track of your activities when trading cryptocurrencies. A detailed track record makes tax reporting way easier when the time comes. Further, if an exchange ceases to exist you might not only lose your coins, but also all the data about your trades. Better to always keep track either manually or by using a specialized tool like CryptoTax which is much more convenient.

3. Crypto to Crypto is a taxable event

In most jurisdictions exchanging one cryptocurrency to another qualifies as a taxable event. Hence you might generate taxable income, while not having the liquidity to pay the tax, i.e. if the value of the new coin drops. That is when it becomes complicated - to eliminate any tax woes related to this, simply use CryptoTax to automatically calculate the tax.

4. Consider filing tax even if you had losses

Cryptocurrencies like Bitcoin undergo strong price fluctuations, where high gains can be realised, losses are not far ways. In most jurisdictions, you can carry losses forward or even backward or maybe offset losses from cryptos with profits from other activities. The easy way is to use a dedicated software like CryptoTax to calculate profits or losses. More information about the regulations in Germany can be found here.

5. Right handling of airdrops and hard forks

You might not even be aware of them, but airdrops and hard forks could be a taxable event in your country. For example, if you receive an airdrop and the amount is tied to the amount of assets you hold this may be seen as an incentive which needs to be reported as additional income. The best way to get on top of crypto taxes is to inform yourself about the rules and regulations in your jurisdiction, talk to an advisor or use specialized software to report on those events.

We’re the first banking service to offer integrated crypto tax reporting solutions to users directly through our app. Starting from early 2020, you can simply download an individualised, ready-to-use tax statement for all your Bitwala transactions with a click of a button from your dashboard. German and Swiss taxpayers will receive country-specific tax reports meeting all legal requirements. EEA residents can generate a generic tax report from the Bitwala dashboard. Filing your tax statements on your cryptocurrencies trades will be as easy as attaching a PDF-file to an email.

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