If you’ve been lucky enough to jump on the cryptocurrency bandwagon early, you might be wondering if you need to pay taxes. Well, I’ll tell you straight up - the IRS requires you to report your cryptocurrency trades and any earnings you’ve made. It can be tough to keep it all straight when filing your taxes, but I recommend using TurboTax to ensure everything is in order.
I love TurboTax for its simplicity. It walks you through every step of the way, even with something as complicated as cryptocurrency. I’ve gathered all the information you need to get started and share it below.
Is Cryptocurrency Taxed?
Many people assume since cryptocurrency is a virtual currency, they don’t owe taxes. It couldn’t be further from the truth, unfortunately. If you’ve invested in crypto long before this year and didn’t report your transactions or pay any applicable taxes, I recommend consulting a tax advisor to amend your returns right away. The IRS is looking for people who haven’t filed their taxes correctly and have started to send letters asking for amended returns.
Unfortunately, not paying your taxes correctly could result in high penalties and interest charges. The faster you get up-to-date with what you could owe, the less it will cost you.
Moving forward, using my guide, you can figure out how to enter cryptocurrency on TurboTax right the first time, so you avoid penalties and interest in the future.
How to Report Cryptocurrency on TurboTax
I like TurboTax because they walk you through every step necessary to report your cryptocurrency. The trick is knowing how to correctly enter cryptocurrency on TurboTax. So, I’ve listed the simple steps below.
First, I want to remind you that you’re responsible for entering the information into TurboTax yourself. It’s also your responsibility to have all the necessary information about your transactions. Some exchanges send a 1099-B or 1099-K, but they aren’t required to do so. It’s best if you keep track of all transactions throughout the year, including:
- Cryptocurrency you sold or converted to US dollars
- Cryptocurrency you’ve exchanged
- Cryptocurrency you used to pay for products or services or received as payment.
The easiest way is to download your transactions from your exchange as a CSV file. You can then import the CSV directly into TurboTax from the top exchanges, including:
If you trade cryptocurrency frequently, keep in mind that you should download your transactions at least every three months because not all exchanges keep data for the entire year.
Unfortunately, if you don’t use one of the above exchanges, you’ll need to enter your transactions manually in TurboTax.
To report cryptocurrency on TurboTax, I’ll lay out the steps below.
- Start your TurboTax tax return like you usually would
- TurboTax will ask for a variety of information, including what financial transactions you’ve had throughout the year. Click ‘I sold or traded Cryptocurrency’ among any other situations that fit your situation.
- Under Wages and Income, select ‘Start’ next to cryptocurrency.
- Click ‘Yes’ when asked if you sold or traded cryptocurrency in the last year.
- Select the exchange you used to trade the crypto. If you don’t see your exchange, you’ll enter the transactions manually.
You can enter up to 2,251 transactions in TurboTax. Don’t worry. I’ve outlined what you must do if you have over 2,251 transactions as well.
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Importing More Than 2,251 Transactions
If you have over 2,251 transactions in cryptocurrency trades, you’ll file your taxes with TurboTax using summaries, not individual transactions. You’ll also need to contact customer support for the exchange you used to get the information necessary to complete your taxes.
You’ll e-file your taxes with the summaries, but you aren’t off the hook yet. The IRS still wants an itemized Form 8949 and IRS Form 8453 included with your tax returns. Once you receive confirmation from the IRS they’ve accepted your return, you’ll have three business days to mail the forms.
To help you out, I’ve included the address here:
Internal Revenue Service
Attn: Shipping and Receiving 0254
Receipt and Control Branch
Austin, TX 73344-0254
Avoid the TurboTax CD or Desktop Version if You Can
The TurboTax CD and desktop versions are different from the web version. My advice is to avoid them if you can because they’re more outdated than what you’ll find on the web. This also makes them less versatile, which you’ll need in the case of cryptocurrency on TurboTax.
The CD and desktop versions don’t offer the same level of support for claiming cryptocurrency trades. However, you’ll have a higher limit of 3,000 transactions if you don’t need the additional help.
I completely get that it’s confusing trying to file taxes when you’re trading cryptocurrency. TurboTax makes it easy to understand since they walk you through step-by-step. If you’re lucky enough to use one of the exchanges they work with directly, though, you can upload a CSV and easily get your tax return underway.
If not, you’ll have to input more information yourself, but TurboTax walks you through each step to help. Even if this step is annoying, I’m urging you to file your taxes correctly and report your cryptocurrency or you’ll pay even more fees and penalties down the road.
If you have over 2,251 crypto transactions, you’ll need to send IRS Form 8949. If you use one of the top exchanges discussed above, you simply can click ‘Reports’ in the dashboard and download Form 8949. You’ll then complete Form 8453, clicking Form 8949 at the bottom to let the IRS know what attachments you’re sending.
If you use TurboTax Premier and Coinbase, you can import your crypto trades directly into TurboTax. This means you don’t need to input anything – everything ready to go for you, making it easier to file your taxes.
It seems strange, but you’ll input cryptocurrency in the income section of TurboTax since you’re technically reporting income from trading crypto (either selling or exchanging). You’re reporting any capital gains to pay taxes on the earnings.
Simply put…Bitcoin works with TurboTax. But, you must first download your transactions as a CSV file. Then, you’ll upload it into TurboTax, saving you the hassle of entering every single transaction manually and preventing you from making any accidental mistakes.