Filing your crypto taxes at the October deadline

Prepare for crypto taxes: your guide to meeting the extension deadline

Tax season might not be the most exciting time of year, but if you’re a US based crypto investor, it’s crucial to get your ducks in a row before the deadline rolls around.

Whether you’re a seasoned trader or just diving into crypto, making sure your taxes are sorted can save you a lot of headaches. Here’s your go-to guide to navigating crypto tax and getting ready for the extension deadline.

Know your deadlines

First things first, let's talk about deadlines. If you’ve filed for an extension by mailing Form 4868, you will have until October 15, 2024 to submit your tax return. Additionally, you can file for an automatic extension by submitting your estimated tax payment on the IRS website. But remember, an extension to file is not the same as an extension to pay. Your tax payment was still due back in April, so if you haven’t paid yet, you might want to settle up to avoid any interest or penalties.

Tax laws around crypto are still evolving, so keep an eye out for any changes in tax regulations or IRS guidance to ensure you’re staying compliant.

Gather your crypto paper trail

Next, it’s time to get organized. Start by collecting all your crypto transaction records from all of your exchanges, wallets, and blockchains.This means tracking every transaction for the year including buys, sells, swaps, deposits, withdrawals, DeFi, NFT activity, and much more. Summ (formerly Crypto Tax Calculator) has over 1000 different integrations with various blockchains, exchanges, and wallets, making the data collection step a breeze. If you have never reported crypto on your taxes, you will need to amend your prior year returns to include your cryptocurrency activity. It might sound like a lot, but keeping detailed records will save you from future headaches when it comes to reporting your cryptocurrency activity.

• Transaction details & account history: Make sure you have all necessary information to accurately report your transactions. This includes but is not limited to cost basis, acquisition date, platform/exchange it was acquired on, disposition date, proceeds, fees, adjustments, and the exchange it was disposed of on. You can find this information by downloading CSV or other transaction forms from your exchange and other providers. You can also automatically import this information directly into Summ by connecting your public wallet address or exchange API information.
• Tax Forms: If you’ve received any 1099s or other tax forms from your exchanges, review them carefully. Sometimes these forms are incomplete, incorrect, or need to be altered, so cross-reference them with your transaction logs.

Calculate gains and losses

You’ll need to calculate your capital gains and losses for the year. Remember, the IRS has specific guidelines on how to calculate these, including whether you’re using FIFO (First In, First Out) or another method.

Gains and losses are calculated by subtracting the cost basis from the proceeds of taxable events. Summ will automatically calculate this information based on the data provided.

• Income reporting: Don’t forget to report any crypto you have received as a result of mining, staking, payments, or other rewards!

Note, starting in 2025, US taxpayers will be required to track their crypto per wallet, using the FIFO or Specific Identification inventory methods.

Review and file your return

With everything in hand, it’s time to review and file your tax return:

• Ensure all taxable events are recorded on your Form 8949. Attach Form 8949 to your tax return and fill in the correct lines on your Schedule D and any other relevant forms on your tax return.
• After attaching your crypto activity, make sure your Form 1040 accurately reflects the information attached to your return.

When you’re ready, file your return by the extension deadline. Electronic filing is usually the fastest and easiest way to go.

Keep your records safe

Finally, don’t forget to keep all your documentation safe. The IRS can audit your returns up to six or more years from the filing date, so keeping a detailed record of your transactions and tax returns is essential.

Tax season doesn’t have to be a nightmare, especially with the right tools and preparation. By following these steps, you’ll be well on your way to meeting the extension deadline.

How Summ Can Help

Use software such as Summ to simplify your reporting process. Summ was built from the ground up to handle complex crypto transactions. Whether you’ve just dabbled in crypto or dived into DeFi and NFTs, you can seamlessly import your transactions and download the necessary tax reports to attach to your tax return, file directly with TurboTax, or share with your accountant.

If your crypto transactions are extensive or particularly complex, consider consulting a tax pro who specializes in cryptocurrency.