I Forgot to Report My Cryptocurrency On My Taxes. What Do I Do Now?

If you own Bitcoin, Ether, or some other cryptocurrency, you may be eligible to file a tax exemption. In many cases, this means that your profits from trading and mining cryptocurrencies in the previous year were too low to trigger reporting requirements. However, as digital currency continues to rise in popularity and value, more and more investors are claiming their cryptocurrency on their taxes. If you didn’t report your cryptocurrency on your taxes last year but you have since realized the potential for an exemption, don’t worry— it’s not too late! Here is what you need to know about filing amended tax returns with the IRS.

What is an amended tax return?

An amended tax return allows you to correct mistakes on your previous year’s tax return. In other words, you’re filling out the same form again with different information from the previous year. If you filed a Schedule D for the year, you can amend it and file it again. If you have already filed your taxes and realize you made a mistake on your investment income, you will have to file an amended return. In some cases, you might also have to file Form 8938 if your net worth is $100,000 or more. There are special rules if you have claimed a loss from digital currencies. In this case, you must report the sale of the cryptocurrency on Form 8938.

How to amend your taxes to report cryptocurrency investments

Step 1: Calculate your capital gains and losses.

Step 2: Determine whether you can claim a loss.

Step 3: Calculate your net investment income.

Step 4: Fill out Form 8938 and Schedule.

Step 5: Prepare for questions from the IRS.

Generally, you can claim losses from selling your cryptocurrency at a loss. Investors often buy and sell cryptocurrencies multiple times a year. If your losses outweigh your gains from one or more sales, you can use those losses to offset other income on your taxes. In some cases, you may even be able to deduct your losses against your ordinary income, which could result in a lower overall tax bill.

How much can you deduct?

The IRS allows you to deduct investment losses on Schedule D, but if you also made money on your cryptocurrency trades, then you have to figure out how much of your gains are taxable. The general rule is that you have to report investment income when it is more than $1. If you made $100 or more on your cryptocurrency trades, then you have to report that amount on your taxes. If you have significant losses, you may be able to deduct them from your overall income.

Is it worth amending your returns?

If you did not report your cryptocurrency gains on your tax return, it is worth amending your returns to report them. You will likely have to pay taxes on the amount of money you received from your cryptocurrency trades. However, having your cryptocurrency gains reported on your taxes may come with other benefits, such as a lower tax rate. If you reported your cryptocurrency gains on your taxes and had to pay taxes on the full amount, you will likely not want to amend your returns. While you may be able to get a bigger refund by amending your taxes, it’s not worth the risk of an audit. However, if you did not report the correct amount, amending your taxes may help you get a larger refund.

Final Words: The Bottom Line

If you traded cryptocurrencies in the past tax year and didn’t report the income, you may be able to amend your taxes to include that on your investment income. If you didn’t report any gains from cryptocurrencies, you can amend your taxes to report your investment income and have to pay taxes on the full amount. If you already reported your cryptocurrency gains and had to pay taxes on the full amount, it may not be worth the risk of an audit by amending your taxes. However, if you did not report the correct amount, it may be worth amending your taxes to get a larger refund.

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