Crypto traders can face stiff consequences if they make this mistake at tax time, says Shehan Chandrasekera, a CPA and head of tax strategy at CoinTracker.
The No. 1 mistake crypto traders tend to make is assuming that the Internal Revenue Service isn't able to see their crypto transactions and therefore they don't need to report them when they file their taxes, says Shehan Chandrasekera, a certified public accountant and head of tax strategy at crypto tax software company
If you use a centralized exchange, like Coinbase, and earn $600 or more in a given year, the exchange willHowever, crypto traders using centralized exchanges shouldn't solely rely on those companies to correctly determine their crypto earnings, income or losses, especially if they're trading on multiple exchanges and making transactions from their own
That's why precise record keeping is key when it comes time to report your crypto earnings to the U.S. government.However, keeping track of each of your crypto transactions and how much various coins were worth when you bought and sold them can be difficult. Virtual currency can be subject to both short-term capital gains tax, which is when you sell crypto you've had for less than a year, or long-term capital gains tax, which is when you sell crypto you've held for over a year.
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