How ZenLedger takes the guessing out of cryptocurrency taxes

Do you have cryptocurrency in your possession? Do you know that everybody who invests in cryptocurrencies is obligated by law to record any gains they make on their tax returns? According to the Internal Revenue Service, this is simply another asset class; hence, transactions involving cryptocurrencies must be reported to the IRS and taxed. The Internal Revenue Service (IRS) was successful in its lawsuit against Coinbase, and as a result, US-based exchanges are now required to transmit user data to the IRS.

According to the results of a recent survey, only 53 percent of Bitcoin investors intend to declare their profits or losses to the Internal Revenue Service. Kevin F. Sweeney, who once worked as a federal tax prosecutor, recently delivered a statement in which he indicated that failure to record investment losses and gains results in significant penalties, including the payment of a penalty as well as interest.

The majority of investors in cryptocurrencies have fully embraced the worldwide nature of trading on exchanges located all over the world, entering and exiting rapidly rising or dropping coins, and shifting assets wherever they need to be in order to participate in the next opportunity. It is going to be very difficult to keep track of all of this activity because there is no reporting standard and no straightforward mechanism to keep track of and account for all of these movements, buys, and sells.

As the Internal Revenue Service continues its crackdown on unreported cryptocurrencies, it is essential to have a solid understanding of how cryptocurrency taxes are calculated and how to do so in the most time-effective manner this filing season. If you made a profit with any token, including Bitcoin, Ethereum, or Litecoin, you are required to pay taxes on that income. However, if you have losses, you may be able to lower the amount of income tax that you owe or the capital gains tax that you pay on stocks or real estate.

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Events Involving Cryptocurrency That Are Taxable

According to the Internal Revenue Service (IRS), all forms of virtual currency are considered to be taxable investments. This places cryptocurrency in the same tax category as stocks and real estate. When a coin is sold for fiat currency (traditional currency) or traded for another cryptocurrency, or when a cryptocurrency is used to acquire goods or services, this constitutes a taxable event. Similarly, the exchange of one cryptocurrency for another (such as bitcoin for ether or an initial coin offering) is considered a taxable event. On the other hand, the event of moving currency from one of your accounts to another (such from your wallet to your exchange account) is not a taxable occurrence.

If you are aware of which coins you should sell at a loss, which coins will be taxable as either short-term or long-term capital gains, and how to harvest your tax losses, you can reduce the amount of money you pay in taxes.

When preparing your tax return for bitcoin, it is essential to take into account all gains and losses, the length of time you had the cryptocurrency, its cost basis, and any transaction costs you incurred. If you have been a trader for a significant amount of time, you probably have thousands of transactions spread out across dozens of different exchanges and wallets. If you aren’t keeping organised and using decent accounting software like ZenLedger to perform the hard work for you, there is a significant chance that you aren’t capturing everything and that you are overpaying on your taxes.

Gains and Losses on Investments, Both Short and Long Term

Form 8949 is a tax filing form that is common knowledge among investors. This form is required to report both short-term and long-term capital gains on assets, which includes bitcoin. Form 8949 requests information such as the date of the purchase of cryptocurrency, the date of the sale of cryptocurrency, proceeds, and income, among other things.

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A gain in short-term capital happens when digital currency is sold after being held for less than a year. When you sell tokens that you have owned for more than a year before doing so, you will have made a long-term capital gain. This type of gain qualifies for a lower tax rate of 0, 15, or 20%, depending on how much money you make. In a manner analogous to that of stock investments, once an asset containing cryptocurrency is sold, the cryptocurrency is placed in either a capital gain or capital loss category.

There are approximately 58 percent of Bitcoin investors who are unaware that they are able to claim a tax credit for losses incurred when investing in cryptocurrencies. If you’ve seen a decline in the value of your investments over the course of this year, there’s a high possibility you could be entitled for a federal income tax refund of up to $3,000. You can offset any profits you made in stocks or real estate this year or going year by putting your cryptocurrency losses against those gains.

Make filing for cryptocurrencies as easy as possible.

In conjunction with TurboTax, a new industry-leading tax software tailored specifically to the needs of bitcoin investors has just been released. ZenLedger has developed a quick and simple method for cryptocurrency investors to pay their taxes and obtain insights into their investments. The company has helped thousands of investors and accountants, and it has handled more than half a billion dollars’ worth of assets.

ZenLedger.io is a piece of crypto accounting software that will assist you in maintaining a positive relationship with the Internal Revenue Service (IRS) and optimising your tax payments. Your whole trading history will be imported into ZenLedger, and the software will prepare your tax forms for you. In addition, you will receive an audit pack, an analysis of tax loss harvesting, and the ability to make informed decisions on your taxes.

The online software enables users to enter bitcoin transactions, compute gains and income, and auto-fill tax forms such as 8949, Schedule D, FinCen 114 FBAR, and FATCA. Additionally, the platform supports many cryptocurrencies. Integration between ZenLedger and TurboTax makes filing taxes simple. In addition to this, ZenLedger comes equipped with the following powerful features:

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ZenLedger is compatible with all of the main cryptocurrency exchanges, wallets, and digital assets, including Coinbase, Binance, Bittrex, Kucoin, Jaxx, Trezor, and Ledger, in addition to a large number of other smaller and more specialised exchanges and coins.
Statements of profit and loss for private investors and certified public accountants ZenLedger ensures that you will never overpay in taxes, regardless of whether you are a miner, day trader, or hodler.
Analysis of the portfolio, including tax loss harvesting and the management of short-term and long-term capital gains, as well as other taxable events
Imports transactions and creates helpful papers, such as Donation Reports, Capital Gains Reports, Income Reports, and Closing Reports.
Offers superior and prompt customer support across all available tiers of service.
A Genuine Crackdown by the IRS

Around one-third of Bitcoin investors are under the mistaken impression that they are not obligated to declare any gains or losses associated with their Bitcoin investments since they did not generate a significant enough profit or loss to qualify as reportable. This is not the case because there is no prerequisite level that must be reached before reporting. The Internal Revenue Service is currently pursuing individuals who use cryptocurrencies to evade taxes or who do not pay taxes on gains from cryptocurrencies. It is an exciting time to be investing in a completely new technology and economy, which both currently have a lot of potential. However, you must make prudent investments. When you use ZenLedger in conjunction with TurboTax, you may have peace of mind knowing that the reporting of your bitcoin investments will be precise, uncomplicated, time-efficient, and in compliance with IRS requirements.

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Evangeline Christina is a Cyber Security Enthusiast, Security Blogger, Technical Editor, Certified Ethical Hacker, Author at Cyberspecial.net. Previously, he worked as a security news reporter in a reputed news agency.