Most people are familiar with the April 15th deadline for individual tax returns, but that’s not the only date you should have marked on your calendar. From quarterly tax payments to tax loss harvesting deadlines, there are several important dates that crypto traders and investors should keep in mind to minimize their taxes and avoid any potential problems.
Let’s take a look at some important tax dates to mark on your calendar, as well as some tips to streamline your taxes this season.
Important Tax Dates
There are several important tax deadlines and other dates to keep in mind throughout the year, depending on your individual situation. For example, long-term investors don’t need to worry about paying estimated taxes each quarter while short-term traders may not need to worry about harvesting their tax losses before the end of the year.
The most important dates to market on your calendar include:
September 15, 2020: Most individuals trading in a taxable account and accumulating profits must make estimated quarterly income tax payments. Missing these payments may trigger penalties and interest charges from the IRS. September 15, 2020 is the quarterly estimated tax deadline for income generated between June 1 and August 31, 2020.
October 15, 2020: If you filed for a tax extension with IRS Form 4868 on or before July 15, 2020, then October 15th is the deadline to file your tax return.
December 31, 2020: Tax loss harvesting can help you reduce your taxable capital gains for the year and even offset up to $3,000 or ordinary income. You need to realize any losses by December 31, 2020 in order to include them on your 2020 taxes, although you should really be harvesting these losses throughout the year to fully minimize your tax burden.
ZenLedger’s Tax Loss Harvesting Worksheet - Source: ZenLedger
January 15, 2021: Many people file their tax returns at the last minute before the April 15th deadline, but there are several benefits to filing on January 15th (the earliest possible date). You can receive any refund earlier and put the money to work and you can accelerate the statute of limitations on prior tax returns, limiting the IRS’ ability to go back and audit your returns.
January 15, 2020 is also the deadline for estimated quarterly income tax payments for the fourth quarter of the prior year.
January 20, 2021: The IRS E-file goes live and the agency starts processing electronic and paper returns for 2020 on January 20th. If you’re waiting for a refund, you will need to wait until after this date to receive your refund, although it’s likely to take a bit longer.
January 31, 2021: Employers must send out all W-2 forms from this date and most traders will receive the forms that they need to complete their taxes. Some exchanges will send you Form 1099-K—showing your gross reportable payment—which is also sent to the IRS. You may want to wait for this information before filing your tax return to ensure that it’s accurate.
April 15, 2021: The last day that you have to file your federal income tax return or request an extension, as well as the tax deadline for most state returns, is April 15th. If you’re paying estimated quarterly income taxes, you must also pay first quarter taxes by this date.
June 15, 2021: The second quarter estimated income tax deadline is June 15th.
September 15, 2021: The third quarter estimated income tax deadline is September 15th.
October 15, 2021: The deadline for filing extended tax returns for both federal and state taxpayers is October 15th.
December 31, 2021: The deadline for harvesting tax losses for 2021 is December 31st.
Note: These dates may be subject to change based on the impact of the COVID-19 pandemic. For example, the IRS deadline for filing 2019 taxes was pushed back to July 15, 2020 due to potential disruptions from the pandemic.
How to Simplify Your Taxes
Income taxes can be intimidating for crypto traders and investors since you must file additional paperwork above and beyond Form 1040. In particular, crypto holders must disclose their crypto activity on Form 1040 Schedule 1 and file Form 8949 to show a record of capital gains and/or losses that are ultimately included on Form 1040 Schedule D.
The IRS treats crypto assets as property, which means that you owe tax on any capital gains. Your taxable gains are the difference between the cost basis (what you paid to acquire the asset) and the sale proceeds (how much you made from the sale). If you received crypto in an air drop or hard fork, the cost basis may be zero (since you didn’t pay anything to acquire it), which means you may owe tax on the entire value.
While cash-to-crypto transactions are straightforward, crypto-to-crypto transactions can be a challenge. You must calculate the cost basis in U.S. dollars for each transaction, which entails looking up and reconciling the U.S. dollar price at the time of the transaction. If you had trades across multiple wallets and exchanges, it’s even more difficult to compute, since you’ll need to cross-reference the accounts to determine the cost basis.
ZenLedger Makes It Easy to Auto-Fill Popular IRS Forms - Source: ZenLedger
ZenLedger automatically integrates with wallets and exchanges to compute these values and auto-fill Form 8949 and Form 1040 Schedule D. In addition, the platform can help you automatically find opportunities to harvest losses throughout the year to offset gains and lower the amount of tax that you owe (or maximize your refund).
The Bottom Line
Most people are familiar with the April 15th deadline to file individual tax returns, but there are several other important tax dates that crypto traders and investors should mark on their calendar. With ZenLedger’s done-for-you solution, you can reduce the stress on tax season and ensure that you’re paying the correct—but minimal—amount of tax each year.
If you’re interested in minimizing your Crypto Taxes and Accounting, try ZenLedger today or check out the rest of our blog or our recorded webinars for a wealth of resources on Crypto Taxes and Accounting and a wide variety of other topics.