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A Quick Guide to Cryptocurrency Accounting for Tax Purposes

Estimated reading time: 2 mins

Trading Capitals changes with time. They are subject to difference regulations, tools, and laws but one thing remains the same, they are tax compliant. Cryptocurrency trading is young, and it lacks proper guidelines from government bodies.

However, they are taxable, and you must keep a record of all activity. Don’t get too lost in book profits that you lose track of the tax audit.

We hate taxes, but we love the civilization they provide us with. Taxes are necessary that helps to move an establishment. Following, we will share some tips that will help you prepare your cryptocurrency tax record, and make it through the taxing event unscathed

Neat Record Keeping

It’s important you record your every activity.

It’s not uncommon people create accounts on several exchanges for different coins and their profit. Consider security and trust issues along with space maturity and register only with reliable cryptocurrencies exchanges.

Use a password manager to secure your password. Ensure all exchanges offer a transaction history CSV.

Download Transaction History from Time to Time

Some exchanges limit transaction history to only three months or thereabouts.

We don’t understand, is it because of technical issues or some architectural decision. This restricts your access to transactions carried out of given period. It leaves you with no records, and you might miss these transactions.

But the Exchange will provide these records if asked by an authority. So, you better keep updatingyour records after two months or so.

Exchanges do this to control the load on their services. Therefore, download the transition history regularly. Set a repeating calendar to help you do it. Set an API client to comply with rate limits and fetch the history.

Stick with a Format

When it comes to Cryptocurrency accounting, you need to pick a format and stick with it.

Thanks to the increasing number of blockchain projects, traders invest in projects by buying tokens. Projects give away tokens to interested users and create a network which will help the project launch.

Keep track of ICO participation because these launches have a record of cost basis for every asset you bought from them. There is accounting software available. These offer a template you can follow to calculate your taxes.

It helps to keep track of your ICO participation, forks, airdrops and other assets you bought from decentralized exchanges.

Keep Track of Your Addresses

Tech enthusiasts love to try out new applications. They don’t mind creating several addresses for different currency wallets. But the issue is, it’s hard keeping track of every address, and their pass keys.

It’s imperative you keep track of all your addresses, it shows how much money you made, and how much you saved. This will help you survive a taxable event. Remember, you won’t trigger this event if you keep your coins.

No, taxable events are applicable when you sell or convert the cryptocurrency to something else, real money or another cryptocurrency. Therefore, having proof that you hold the asset will be a great help. For more information, visit https://searched.io/blockchain-marketing-agency/.

 

About the author /


Simon is a creative and passionate business leader dedicated to having fun in the pursuit of high performance and personal development. He is co-founder of Applied Change, a Business Change consultancy based in the UK. Simon is also an Ambassador for Gloucestershire business. Simon is an Associate Member of the Chartered Institute of Professional Development.

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