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Cash App

You’re on your Cash App and spot some cash from selling Bitcoin last month. But then you wonder, Do I need to pay taxes on this? If tax time makes you scratch your head, you’re not the only one. Figuring out Cash App taxes can feel tricky. But don’t worry! By the end of this guide, you’ll know how to manage your Cash App taxes easily.

Cash App, which used to be called Squash Cash, is super popular in the U.S. and the UK. It has over 70 million users. You can send money to friends, trade stocks, or deal with Bitcoin all in one app. It’s simple and handy. But here’s the deal: when it comes to money, taxes are involved. Whether you’re selling Bitcoin, getting it as payment, or just moving it around, you got to pay up. And yes, Cash App tells the IRS about your Bitcoin activities. So, let’s break down how taxes work with Cash App, step by step.

What Are Cash App Taxes?

Let’s start with the basics. Taxes on Cash App transactions, particularly Bitcoin, fall under two categories:

  1. Capital Gains Tax
    • This applies when you sell Bitcoin on a Cash App and make a profit. If you purchased Bitcoin at $500 and sold it for $800, you’ll owe tax on the $300 profit.
    • The rate depends on how long you hold the Bitcoin. Sold within a year? You’ll pay short-term capital gains tax at your regular income tax rate. Held for over a year? You’ll benefit from lower long-term capital gains rates.
  2. Income Tax
    • Receiving Bitcoin as payment? That’s income. The tax you owe is based on the fair market value of Bitcoin on the day you receive it. For example, if you received 0.01 BTC when it was worth $400, you’ll report $400 as income.

Does Cash App Provide Tax Forms?

Yes! If you’ve sold Bitcoin on a Cash App, you’ll receive a Form 1099-B. This document reports the gross proceeds from your sales. But—and here’s the tricky part—it often lacks cost basis information, especially if you transferred Bitcoin into or out of your Cash App account. This means you’ll need to manually track and calculate your gains and losses for accurate reporting.

For UK users, unfortunately, Cash App doesn’t provide tax documents. You’ll need to maintain your own records of Bitcoin transactions.

How to Sell Bitcoin on Cash App

Selling Bitcoin on Cash App is straightforward. Here’s how you can do it:

  1. Open your Cash App and navigate to the Investing tab on the home screen.
  2. Select Bitcoin from the options available.
  3. Tap on the Sell button.
  4. Choose the amount of Bitcoin you want to sell or enter a custom amount.
  5. Confirm the transaction details, including fees, and tap Confirm to finalize the sale.

Once the sale is complete, the funds from your Bitcoin sale will be deposited into your Cash App balance. Remember, any profits you make from selling Bitcoin are subject to Capital Gains Tax, so keep a record of the sale for tax purposes.

How to File Your Cash App Taxes in Four Easy Steps

1. Collect Your Transaction History

Start by gathering all records of your Bitcoin transactions. From Cash App:

  • Navigate to the “Tax Documents” section in your account settings.
  • Download your Form 1099-B (if available).

If you’ve moved Bitcoin to or from other wallets or exchanges, retrieve records from those platforms as well. Keep everything—dates, amounts, and values—organized.

2. Calculate Your Gains and Losses

Here’s where the magic happens. To calculate:

  • Subtract the cost basis (what you paid for Bitcoin) from the proceeds (what you sold it for).
  • Determine whether it’s a short-term or long-term gain based on your holding period.

For instance, let’s say you bought 0.05 BTC for $1,500 and later sold it for $2,000. That’s a $500 gain. If held for less than a year, it’s taxed as ordinary income. Over a year, you’ll enjoy a lower rate.

3. Use Crypto Tax Software

Feeling overwhelmed? Don’t worry; you’re not expected to be a human calculator. Crypto tax software like ZenLedger can:

Cash App Crypto Taxes
  • Automatically import your Cash App transactions.
  • Calculate gains, losses, and taxable income.
  • Generate IRS-compliant tax forms.

This tool saves time, reduces errors, and makes filing your taxes less stressful. 

4. File Your Taxes

Finally, it’s time to report everything:

  • Attach Form 8949 to your tax return to list all crypto transactions.
  • Use Schedule D to summarize your total gains and losses.
  • Report Bitcoin income on your tax return’s income section.

If you’re unsure, consult a tax professional. It’s always better to double-check than to risk penalties.

Common Questions About Cash App Bitcoin Taxes

  • Do you have to pay taxes on Cash App? Yes. If you sell Bitcoin or receive it as income, taxes apply. Ignoring them could lead to trouble with the IRS.
  • Does the Cash App report to the IRS? Absolutely. Whenever you receive a 1099-B form, the IRS gets a copy too.
  • How do I sell Bitcoin on a Cash App? Open Cash App, go to the Investing tab, select Bitcoin, tap Sell, and follow the prompts. Just remember to factor in taxes before you spend those proceeds!

How to Avoid Taxes on Cash App

Tax evasion is illegal, but you can take steps to reduce your tax bill.

Some of the most impactful steps you can take include:

  • Use tax-advantaged accounts. Crypto IRAs enable you to avoid taxes now (traditional IRA) or avoid taxes on capital gains (Roth IRA). While Cash App doesn’t offer a Bitcoin IRA, you can transfer coins from Cash App into a compatible IRA.
  • Hold for longer than one year. Holding Bitcoin or other cryptocurrencies for longer than one year means you pay the lower long-term capital gains tax rate instead of the much higher ordinary income tax rate.
  • Harvest your tax losses. If you hold Bitcoin at a loss, you can sell it to realize the loss and deduct it from other capital gains or income. The only catch is that you may be unable to repurchase it for 30 calendar days.
  • File your tax return on time. The IRS’ failure-to-file penalty is 5% of the unpaid monthly taxes, compared to just 1% per month if you can’t afford to pay. So, even if you can’t pay your taxes on time, file on time to avoid hefty penalties.

Benefits of Using Cash App for Taxes

Cash App offers several benefits that can streamline your tax preparation:

  • Transaction Tracking: Provides a clear transaction history, making it easier to track income and expenses.
  • Electronic Records: Digital receipts reduce the risk of losing paper records.
  • Simplified Expense Categorization: Categorize transactions to differentiate personal and business expenses.
  • Integration with Accounting Software: Direct integration minimizes manual data entry.
  • Instant Access to Statements: Download monthly statements for a concise financial overview.
  • Efficient Payouts and Reimbursements: Quick transfer features facilitate well-documented financial transactions.

Common Mistakes to Avoid When Filing Cryptocurrency Taxes

  1. Overlooking Small Transactions: Track and report all transactions, regardless of size.
  2. Incorrect Cost Basis Calculations: Maintain detailed records of acquisition costs, including fees.
  3. Failure to Report Crypto-to-Crypto Trades: Treat crypto-to-crypto trades as taxable events.
  4. Not Seeking Professional Guidance: Engage a tax professional for tailored advice.
  5. Ignoring IRS Guidelines: Stay updated on IRS announcements and changes.
  6. Not Reporting Taxes at All: Prioritize compliance to avoid legal consequences.
  7. Neglecting Transaction History: Keep comprehensive records of all crypto activities.
  8. Missing Tax Loss Harvesting Opportunities: Offset gains with losses to reduce liability.

Final Thoughts

Dealing with Cash App taxes doesn’t have to be tough. With a bit of organization and the right tools, you can handle Bitcoin taxes easily. It’s just another part of taking control of your money and making sure you’re following the rules.

So, what should you do next? Start by collecting your records and figuring out your gains. Look into crypto tax software to make things easier. Let’s be real—wouldn’t you rather spend tax season thinking about your next Bitcoin move instead of worrying about paperwork?

By following this guide, you’ll tackle Cash App taxes with confidence. Who knows? Maybe next year you’ll be the go-to friend for crypto tax questions!

ZenLedger can help you easily calculate your crypto taxes, and also find opportunities for you to save money and trade smarter. Get started for free now or learn more about our tax professional prepared plans!

Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide tax, legal, or financial advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.

Cash App Taxes FAQs

1. Do I have to pay taxes on Bitcoin sold via Cash App?

Yes, any profits made from selling Bitcoin on Cash App are subject to Capital Gains Tax. If you received Bitcoin as income, you’ll need to pay Income Tax as well.

2. Does the Cash App provide tax documents?

Cash App provides a Form 1099-B to U.S. users who have sold Bitcoin. However, it may not include the cost basis, so you’ll need to track that yourself.

3. How can I calculate my Bitcoin taxes on Cash App?

To calculate your taxes, determine the cost basis (purchase price) and subtract it from the selling price. Use crypto tax software to simplify the process.

4. Does Cash App report Bitcoin transactions to the IRS?

Yes, Cash App reports Bitcoin transactions to the IRS. If you receive a 1099-B form, the IRS gets a copy too.

5. Can I use crypto tax software for Cash App taxes?

Absolutely! Tools like ZenLedger can automatically import Cash App transactions, calculate taxes, and generate IRS-compliant forms for easy filing.