The Internal Revenue Service (IRS) first released a set of guidelines in 2014 relating to how to go about filing crypto taxes. However, only a small number of crypto traders reported their income from cryptocurrencies. In recent years, the IRS has started cracking down on crypto taxation and has recommended all crypto traders to maintain an intricate record of all their crypto related activities. For the ones who have purposely avoided paying or filing their crypto activities, they should be prepared for any possible penalties as they will be closely scrutinized by the IRS.
In July 2019, the IRS officially stated that it had sent warning letters to over 10000 crypto taxpayers who they suspect to have potentially failed to report their crypto income and have not paid the resulting tax from cryptocurrency transactions. Also, there was another set of letters issued specifically for the taxpayers who did not report their crypto transactions properly. Both these letters state that incorrect reporting of crypto dealings and income will result in penalties, interest and in some cases, criminal prosecution. Sensing the problems that can arise from this, many companies have started releasing free crypto tax calculators online to help crypto traders in preparing their tax reports.
How Do I Report My Cryptocurrency Taxes?
After calculating all the crypto information required, traders need to attach a copy and fill in the IRS Form 8949. This form needs to contain a detailed report of all your crypto transactions which will be checked against your capital gains or losses for the year.
Form 8949 is a tax form mandated by the IRS to be filed by all crypto traders. Each crypto transaction that is either, purchased, sold or traded will need to be recorded. Along with the date of purchase and for how much it was originally acquired for. By doing this, your cost basis and Fair Market Value will be established which is necessary to calculate your capital gains or losses accurately. After this, transfer the amount of capital gains or losses to Schedule D which is an attachment of Form 1040.
What are the Free Crypto Tax Calculators for Crypto Traders?
The Free Crypto Tax Calculators available on the market right now along with their features are listed below.
TokenTax is designed to support every major crypto exchange and is found on every top 10 free crypto tax calculator list. Apart from calculating your crypto taxes, TokenTax has many additional features to assist with all your crypto needs.
- It can automatically generate tax forms like Form 8949 for returns.
- It imports your crypto data and information from exchanges to fill in Form 8949.
- It enables you to track capital gains and losses and other tax liabilities for each crypto trade.
- It has a tax-loss harvesting feature enabled on its dashboard that displays your unrealized gains and losses.
ZenLedger is a well renowned free crypto tax calculator. It doubles as a great crypto tax software as well and provides a ton of additional features, some of which are listed below.
- It is compatible with all major crypto exchanges, supporting cryptocurrencies and fiat currencies.
- It imports your crypto trading history and seamlessly generates the important documents such as donations report, capital gains report, closing report and income report.
- It also provides you with accurate profit and loss statements for you or your Certified Public Accountant (CPA) to use.
CoinTracker is another free crypto tax calculator and software. Claiming to be the one stop solution for all your crypto needs, some of their features are as follows.
- It provides crypto traders to review their tax summary and download completed reports which are required to file crypto taxes.
- It can be integrated with TurboTax, hassle-free.
- It provides options such as fee and margin trading.
- It provides traders with a performance tracker which can visually provide information on a trader’s crypto investment and portfolio management.
CryptoTrader.tax allows crypto traders to calculate capital gains or losses within minutes of importing a trader’s crypto data and ensures that you do not overpay your taxes. This free crypto tax calculator generates completed tax forms which are IRS compatible. CryptoTrader.Tax is well known for their international tax support and is quite capable of calculating your capital gains and losses using traditional fiat currency. These tax reports will include precise information of a trader’s crypto activities which are as follows.
- Cryptocurrency Income Report
- Long-term and Short-term Sales Report
- The IRS Form 8949
- The TaxAct Direct Import Report
- End of the Year Positions Report
- A Crypto trader’s Audit Trail Report
BearTax is not only a free crypto tax calculator but also offers useful tools to go about filing your crypto taxes such as calculating your capital gains and losses and providing you with export documents to file with your tax report.
- A dedicated section for capital gains and losses on individual crypto trades.
- Displays information such as the date you bought, sold or traded each crypto coin.
- ‘Smart matching’ algorithm (matches crypto deposits and withdrawals from supported exchanges).
- Ability to review individual trades and helps avoid negative balances.
Beartax is compatible with not only centralized exchanges but decentralized exchanges as well. If you use an exchange which isn’t compatible, the option to upload your crypto data in a CSV file format into BearTax’s platform is available.