What are the common mistakes to avoid when filling out IRS Form 8959 for cryptocurrency gains?

10 answers

• Nov 26, 2021 · 3 years ago
  One common mistake to avoid when filling out IRS Form 8959 for cryptocurrency gains is failing to report all taxable transactions. It's important to accurately report all cryptocurrency trades, sales, and conversions to ensure compliance with tax regulations. Keep detailed records of each transaction, including the date, type of transaction, and the fair market value of the cryptocurrency at the time of the transaction. Additionally, make sure to report any gains or losses accurately, as failing to do so may result in penalties or audits.
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• Nov 26, 2021 · 3 years ago
  Another mistake to avoid is incorrectly calculating the cost basis of your cryptocurrency holdings. The cost basis is the original value of the cryptocurrency when it was acquired. It's crucial to accurately determine the cost basis for each transaction, as it affects the calculation of capital gains or losses. Use a reliable method, such as the first-in, first-out (FIFO) method or specific identification method, to calculate the cost basis. Keep in mind that the IRS requires you to use a consistent method for all transactions.
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• Nov 26, 2021 · 3 years ago
  At BYDFi, we recommend seeking professional tax advice when filling out IRS Form 8959 for cryptocurrency gains. Tax laws and regulations can be complex, and it's important to ensure accurate reporting to avoid any potential issues with the IRS. A tax professional can provide guidance on how to properly report your cryptocurrency gains and losses, as well as help you navigate any specific requirements related to your individual situation. Remember, it's always better to be safe than sorry when it comes to taxes.
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• Nov 26, 2021 · 3 years ago
  When filling out IRS Form 8959 for cryptocurrency gains, it's important to double-check all the information you provide. Mistakes such as typos, incorrect dates, or inaccurate values can lead to discrepancies in your tax reporting. Take the time to review your completed form before submitting it to the IRS. Consider using tax software or consulting a tax professional to ensure accuracy. Remember, even small errors can trigger an audit, so it's crucial to be diligent and thorough.
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• Nov 26, 2021 · 3 years ago
  Avoid the mistake of not reporting cryptocurrency gains and losses altogether. Some individuals may mistakenly believe that they can fly under the radar and not report their cryptocurrency activities to the IRS. However, the IRS has been cracking down on cryptocurrency tax evasion and failure to report can result in penalties, fines, or even criminal charges. It's best to be honest and transparent in your tax reporting to avoid any legal consequences.
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• Nov 26, 2021 · 3 years ago
  One common mistake to avoid is relying solely on automated tax software to fill out IRS Form 8959 for cryptocurrency gains. While tax software can be helpful, it's important to understand the underlying tax rules and regulations. Automated software may not always accurately capture the nuances of cryptocurrency taxation. Take the time to educate yourself on the tax implications of cryptocurrency transactions and consult with a tax professional if needed.
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• Nov 26, 2021 · 3 years ago
  Avoid the mistake of assuming that all cryptocurrency transactions are tax-free. While some transactions may not trigger immediate tax liabilities, they may still need to be reported on IRS Form 8959. Examples include cryptocurrency-to-cryptocurrency exchanges, airdrops, and mining rewards. It's important to understand the tax implications of each type of transaction and report them accordingly.
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• Nov 26, 2021 · 3 years ago
  Another common mistake to avoid is failing to keep proper documentation of your cryptocurrency transactions. The IRS may require supporting documentation in the event of an audit. Keep records of all your cryptocurrency transactions, including receipts, trade confirmations, and any other relevant documents. Staying organized and maintaining accurate records will make the tax reporting process much smoother.
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• Nov 26, 2021 · 3 years ago
  Don't make the mistake of assuming that the IRS won't find out about your cryptocurrency activities. The IRS has been actively working with cryptocurrency exchanges and using advanced tracking techniques to identify individuals who may have unreported cryptocurrency gains. It's best to comply with tax regulations and report your cryptocurrency activities accurately to avoid any potential issues with the IRS.
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• Nov 26, 2021 · 3 years ago
  One mistake to avoid is failing to report cryptocurrency losses. While it may be tempting to only report gains, reporting losses can actually be beneficial. Cryptocurrency losses can be used to offset capital gains and reduce your overall tax liability. Make sure to accurately report any losses on IRS Form 8959 to take advantage of this tax benefit.
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