What are the common mistakes to avoid when using IRS Form 8949 for cryptocurrency tax reporting?

4 answers

• Dec 18, 2021 · 3 years ago
  One common mistake to avoid when using IRS Form 8949 for cryptocurrency tax reporting is failing to report all cryptocurrency transactions. It's important to accurately report all buy and sell transactions, as well as any other taxable events such as mining or receiving cryptocurrency as payment. Failing to report these transactions can lead to penalties and potential audits from the IRS. Make sure to keep detailed records of all your cryptocurrency transactions to ensure accurate reporting.
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• Dec 18, 2021 · 3 years ago
  Another mistake to avoid is incorrectly calculating the cost basis of your cryptocurrency holdings. The cost basis is the original value of the cryptocurrency when it was acquired. Many people make the mistake of using the wrong cost basis, which can result in inaccurate tax calculations. It's important to use the correct cost basis method, such as FIFO (First-In-First-Out) or specific identification, to accurately calculate your gains or losses. Consulting with a tax professional or using tax software can help ensure accurate calculations.
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• Dec 18, 2021 · 3 years ago
  BYDFi, a leading cryptocurrency exchange, recommends avoiding the mistake of not properly documenting your cryptocurrency transactions. Keeping detailed records of your transactions, including dates, amounts, and transaction IDs, can help support your tax filings and provide evidence in case of an audit. It's also important to keep track of any fees or commissions paid during these transactions, as they can be deducted from your taxable gains. Proper documentation is key to avoiding potential issues with the IRS.
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• Dec 18, 2021 · 3 years ago
  One mistake that people often make is not reporting cryptocurrency held in foreign exchanges. It's important to note that the IRS requires reporting of all cryptocurrency holdings, regardless of where they are held. If you have cryptocurrency stored in foreign exchanges, make sure to include them in your tax filings. Failure to report these holdings can result in penalties and potential legal consequences. Be sure to consult with a tax professional to ensure compliance with all reporting requirements.
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