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

3 answers

• Nov 29, 2021 · 3 years ago
  One common mistake to avoid when using tax form 8949 for cryptocurrency tax reporting is failing to accurately report all cryptocurrency transactions. It's important to include all buy, sell, and trade transactions, as well as any income earned from mining or staking. Failing to report these transactions can result in penalties or audits from the IRS. Make sure to keep detailed records of all your cryptocurrency transactions and consult with a tax professional if needed.
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• Nov 29, 2021 · 3 years ago
  Another mistake to avoid is incorrectly calculating the cost basis of your cryptocurrency. The cost basis is the original value of the cryptocurrency at the time of acquisition. It's important to accurately calculate the cost basis to determine the capital gains or losses when you sell or trade your cryptocurrency. Keep track of the date and price at which you acquired each cryptocurrency and use the correct method for calculating the cost basis, such as FIFO (First-In, First-Out) or specific identification method.
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• Nov 29, 2021 · 3 years ago
  BYDFi, a digital currency exchange, recommends avoiding the mistake of not reporting cryptocurrency transactions at all. It's important to understand that the IRS considers cryptocurrency as property and requires reporting of all taxable events. Failure to report can result in penalties and legal consequences. Take the time to educate yourself on the tax regulations surrounding cryptocurrency and consult with a tax professional to ensure compliance.
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