Crypto traders are warned about the mistake of assuming that the IRS cannot see their transactions and therefore not reporting them when filing taxes. The IRS expects all taxable crypto transactions to be reported, regardless of the amount earned or lost. Traders should not solely rely on centralized exchanges to determine their earnings, as these exchanges may not have complete visibility into transactions made outside of their platform. Precise record keeping is crucial when reporting crypto earnings to the U.S. government.
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. "People still think that crypto is kind of invisible to regulators," Chandrasekera tells CNBC Make It.
"Truthfully, there are so many ways the IRS knows you've had something to do with crypto." Remember, the IRS expects you to report all of your taxable crypto transactions from throughout the year when filing your taxes, no matter how much or how little you may have earned or lost. If you use a centralized exchange, like Coinbase, and earn $600 or more in a given year, the exchange will However, 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 "These exchanges only have visibility into what's happening inside their platform," he says. "Most of these tax forms may be incomplete or inaccurate because exchanges don't know what the taxpayer is doing outside of that exchange." That's why precise record keeping is key when it comes time to report your crypto earnings to the U.S. governmen
Crypto Traders IRS Transactions Taxes Earnings Losses Centralized Exchanges Record Keeping
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