Mastering Crypto Taxes On TurboTax - A Step-by-Step Guide For 2023

Mastering Crypto Taxes on TurboTax: A Step-by-Step Guide

Marcus Marion, CMA™ 7 months ago 0 10

Are you looking to prepare your taxes but unsure what papers to fill out or how much you may deduct? As long as you don’t mind wading through several invites to upgrade or add on new features, TurboTax could be the ideal software for you to use to file your taxes.

And now TurboTax has added cryptocurrency taxes to its suite of solutions.

Although cryptocurrency is sometimes called “virtual currency” by the public, the Internal Revenue Service does not recognize it as legal tender. The Internal Revenue Service (IRS) considers cryptocurrencies property, as stated in Notice 2014–21 of the IRS. Any capital gains or losses must be reported using Schedule D and Form 8949.

This article will help you file taxes for Bitcoin and crypto on TurboTax to help those wondering how to make your own cryptocurrency taxes.

Is TurboTax Right for You?

TurboTax simplifies tax preparation for users of all levels of expertise by leading them through the filing steps with interview-style prompts and providing access to live, on-screen assistance when necessary.

Intuit’s TurboTax is one of the most widely used tax preparation and filing options. It also comes with excellent UI and design while giving users many options.

Can I Use TurboTax to Submit My Cryptocurrency Taxes?

crypto on turbotax

The answer is yes; you can file cryptocurrency tax returns with TurboTax.

It is vital to remember that although TurboTax is a top-tier tax preparation solution, it was designed initially with something other than cryptocurrencies in mind. This means it may need more features and integrations to make filing your crypto taxes a breeze.

For this reason, TurboTax has collaborated with major crypto wallets and platforms to facilitate the transfer of tax documents related to cryptocurrency transactions from users’ wallets and exchanges.

Inherited Cryptocurrency is handled in the same way as other inherited Assets.

Transferring cryptocurrencies from one generation to the next is handled the same way as moving any other capital asset. If the value of their estate is higher than the applicable threshold ($12.92 million in 2023), you may have to pay estate taxes.

Like stocks, cryptocurrency has its cost base adjusted to its fair value on the day of death. Meanwhile, most individuals view cryptocurrencies as a standard kind of investment capital.

Steps to Enter Your Crypto Losses And Gains on TurboTax

how to report crypto losses on turbotax

To use TurboTax Online, go to the website and choose either the Premier or Self-Employment Package.

Get on TurboTax Online and choose a plan that works for you. But remember, you can only report income earned in cryptocurrency with both Premier and Self-Employed packages.

1. Respond to Initial Questions and Prompts

When you initially sign in to TurboTax Online, the program will ask you to respond to a series of introductory prompts and enter some basic information about yourself. You can only go further in the app if you complete this step.

2. Choose ‘I Sold Stock, Crypto, or Other Investments

You will see several options, and the platform will request that you find the one that applies to you.

3. Go to the Portion for Cryptocurrency

To access the Cryptocurrency portion of the application, first navigate to the ‘Federal’ page and then choose the ‘Wages & Income’ option from the submenu that appears.

4. Enter the Details of Your Cryptocurrency

Tap Start/Edit under Wages and Income to access the Investments and Savings area containing the cryptocurrency module.

how to report crypto on turbotax

5. Choose “Yes” if You Plan to Have Investment Income Within the Year

Earnings from cryptocurrency mining are considered investment income. Even if you lose money on crypto investments, you should still use the ‘Yes’ option because it’s the section where you disclose your losses.

6. Choose “Enter a different way” from the Tax Import Screen

When you submit your crypto profits and losses, including the information from every exchange and wallet is essential. If you don’t, you could be missing cost basis information, which would cause your capital gains for the year to be much higher than needed.

7. Choose Cryptocurrency as the Investment Type

Choose the Cryptocurrency option and press the Continue button.

8. Click the “Upload it From My Computer” Option

how to do crypto taxes on turbotax

Click the option that allows you to upload from your local computer.

1. Make Sure “Other” is Selected as Your Platform

For instance, click CoinLedger from the platform dropdown menu to be the one you are importing from, and then click the ‘Continue’ button.

2. Load the ‘TurboTax Online’ CSV file

You can import the file you obtained into TurboTax by downloading it from the tax report dashboard in CoinLedger. This file compiles all your profits and losses when trading cryptocurrencies across your wallets and exchange accounts into a single record.

This explains why choosing the right crypto platform that allows you to compile your tax reports seamlessly is vital. Just set up an account, link your cryptocurrency exchanges and wallets, and then generate the relevant tax returns for your cryptocurrency holdings with the touch of a button.

3. Check Your Numbers and Click “Continue”

Once you complete the import phase, TurboTax will prompt you to review the sales and choose which transactions should be taxed. To continue, just scroll down to the section labeled “Taxable Transactions” and click “Continue.” The platform will only add these transactions to your report.

4. Congratulations! You’re Done

That concludes the procedure! You can view a comprehensive record of your crypto asset profits and losses once you have finished all of the stages outlined previously.

How do I declare regular cryptocurrency income on TurboTax Online (as opposed to how to report crypto losses on TurboTax)?

Keep in mind that the procedure outlined above is intended to assist you in reporting your gains and losses from investments. Earnings from mining or staking cryptocurrencies are considered different sources of income and must be reported as such.

The procedure for reporting this crypto tax form is as follows:

  • After clicking the Federal Tab, proceed to the Wages & Income section.
  • Locate the row that is titled “Less Common Income,” then select the button labeled “Show More.”
  • After navigating other tax options, hit the ‘Start’ button once you have found the area titled ‘Miscellaneous Income.’
  • Select the “Start” button once you have reached the final part of the form, titled “Other reportable income.”
  • You can input the specifics of your cryptocurrency revenue earned throughout the tax year, such as through staking, interest, and other sources. Your whole ‘crypto income’ may be quickly located within the income report generated for you.

What is the Procedure for Filing Crypto on TurboTax Desktop?

You may also submit any gains, losses, and income associated with cryptocurrency trading through the Desktop version of TurboTax. If you installed TurboTax’s desktop version, rather than downloading a CSV file to record your crypto activities, you must download a txf file instead.

Is it possible to import data from Crypto Platforms using TurboTax?

Everyone can now obtain a record of their crypto transactions from exchanges like Coinbase for filing their tax returns using TurboTax.

But for instance, if you have ever moved cryptocurrency that you own across various wallets and exchanges using Coinbase, you should know that Coinbase’s estimation of your capital gains may be significantly inflated if you use the service.

This is a crucial point to keep in mind.

Because of its inability to monitor transactions between wallets and exchanges, TurboTax will have problems determining your earnings and losses from your crypto transactions.

The good news is that you can leverage a service like CoinLedger to deal with this issue.

Is There a Better Cryptocurrency Platform to Use Alongside TurboTax?

filing crypto on turbotax

Are you looking for the most effective cryptocurrency tax software to employ in conjunction with TurboTax? Here are a few things to consider when choosing a crypto platform compatible with TurboTax.

  • Highly functional: The options interact with countless cryptocurrency exchanges and wallets, including Coinbase, Kraken, and Gemini, as well as blockchains like Ethereum and Solana, making them competent solutions.
  • Offering the Assistance You Require: We understand how challenging it may be to file taxes without professional assistance. Suppose you ever find yourself in need of professional expertise. In that case, the best solutions offer ready-to-help support via email or live chat to help address any concerns.
  • One-click Data Importation: With just a click, you may upload your gains and losses into TurboTax and other tax software after importing your cryptocurrency transaction history and creating your cryptocurrency tax reports on the right platform.

If my monthly transactions are above $20,000, what should I do?

Currently, TurboTax Online can only integrate a maximum of 20,000 cryptocurrency transactions from a limited number of exchangers.

Fortunately, users may still integrate their transactions and submit their taxes using TurboTax Online even if their transactions exceed 20,000 because the correct crypto ledgers automatically condense files using asset types.

For you to electronically file a consolidated Form 8949, you must take one more step and send the IRS a hard copy of the Form 8949 once it has been completed.

Final Words

Intelligent microcopy and user interface themes that anticipate the user’s next move can be observed in TurboTax. Their product team invested a lot of time into usability testing, going through numerous iterations of this intricate procedure. The outcome is simplicity that looking to learn how to make money with cryptocurrency can appreciate.

Using cryptocurrency can be rather time-consuming, especially with monitoring your cost basis, recording your effective realized price, and possibly paying tax (even without a formal Form 1099 statement). Fortunately, this guide has taught you how to fill your crypto taxes using TurboTax.

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