One of the most important things for an individual or business in Cryptocurrency Tax Reporting is to be aware of the tax filing requirement that comes with this new asset class. The IRS has been increasing its reach with tax on crypto in India and it is important for Cryptocurrency Taxpayers to be able to keep up with the changes. Knowing how to report and handle your taxes in Cryptocurrency will help protect you from liability, penalties, and audits.
Here are six tips you need to know before filing your taxes with Cryptocurrency Tax Reporting :
1. Keep Capitalization in Mind :
The first thing you will need to do is to keep in mind your capitalization. The capitalization is the total amount of money you owned that was turned into Cryptocurrency and the total amount of Cryptocurrency that was generated while you were in possession. Understanding this concept will help you decide how much to report on your taxes and will also prevent you from reporting too little or too much.
2. Keep in Mind Your Holding Period :
The holding period is another essential thing you will need to consider when filing taxes with Cryptocurrency. You will need to understand the length of time you were in possession of Cryptocurrency and how long it took for the transactions to take place. This is going to help you determine how much you are going to be able to deduct and report.
3. Keep Track of Your Capital Gain and Losses :
You need to keep track of your capital gain and losses in order to determine how much you would be able to have deducted from your Cryptocurrency Tax Reporting . The capital gain is what you gained while holding Cryptocurrency that was then sold and the capital loss is what you ended up with when the Cryptocurrency was finally sold. This is important because you need to know how much Cryptocurrency you will be able to deduct from what you actually sold.
4. Maintain Records :
You will want to maintain records of your transactions and holdings in order to be able to determine how much you are going to be able to deduct and report. This will be essential when you are filing your taxes so you can calculate the amount of Cryptocurrency that will support any tax deduction and will enable you to claim the right deductions on your Cryptocurrency Tax Reporting.
5. Keep Track of Your Overseas Tax Deposits :
You have to maintain records of your overseas tax deposits so you will not be able to claim an overseas tax deduction when you are filing your Cryptocurrency Tax Reporting . It is important that you keep track of these deposits because this will ensure that the amount is available for a Cryptocurrency tax deduction when it comes time to file. Keeping track of all that is required will help you avoid filing incorrect amounts and will enable you to keep yourself from being penalised for under filing or over filing your taxes.
6. Comply with Withholding Requirements :
You will need to comply with the withholding requirements when it comes time to file your Cryptocurrency Tax Reporting. You will need to keep track of your taxes that were withheld and the amount of tax that was withheld from each transaction. This is important because you will be able to deduct these amounts when it comes time to file your taxes.
Binocs is a software which specialises in crypto portfolio management and Tax Filing and helps you manage your tax liability. This software is simple to use and is able to keep track of your Cryptocurrency transactions from all the major exchanges. The software will enable you to file your tax return in a simple and effective way.