How To Do Your Binance Taxes - Building Your Required Crypto Tax Forms

Binance has grown to be one of the largest cryptocurrency exchanges in the world. Millions of traders use Binance as a result of its broad support for a large number of cryptocurrencies and its relative ease of use. However, when it comes to doing your Binance taxes and building out your required Binance tax forms, many challenges arise. This article dives into the issue and explains the easiest way to build out your required Binance tax forms.

Depending on what country you live in, your cryptocurrency will be subject to different tax rules. The article below addresses implications within the United States, but similar issues arise around the world. As always, check with a local tax professional to assess your own particular tax situation.

A Quick Rundown of How the IRS Treats Cryptocurrency for Tax Purposes in the US

The IRS treats cryptocurrencies as property for tax purposes. Just like other forms of property—stocks, bonds, real estate—you incur a tax reporting liability when you sell or trade cryptocurrency for more or less than you acquired it for.

In this sense, cryptocurrency trading looks similar to trading stocks for tax purposes.

For example, if you purchased 0.1 Bitcoin for $1000 in April of 2018 and then sold it two months later for $2,000, you have a $1,000 capital gain. You report this gain on your tax return, and depending on what tax bracket you fall under, you will pay a certain percentage of tax on the gain. Rates fluctuate based on your tax bracket as well as depending on if it was a short term vs. a long term gain.  

On the flip side, if you sold your cryptocurrency for less than you acquired it for, you can write off that capital loss to save money on your crypto taxes.

Binance Taxes - Breaking Down the Problem

Binance can’t provide users with necessary tax reports commonly received in the world of trading stocks for a number of reasons.

The first problem is that all trades on Binance are quoted in cryptocurrency. Because you need to be calculating the fair market value in your local FIAT currency at the time of your trades (let’s say US Dollars), this becomes very problematic, and Binance does not have this data.

Second, because you are able to send crypto into and out of the Binance network, Binance has no way of knowing at what cost basis you acquired or sold that crypto for. Cost basis is essential data you need in the calculation of your crypto taxes.

You can read our complete guide for a deeper understanding of how bitcoin taxes work.

So if Binance can’t give me my necessary tax forms, how do I get them?

To properly build out your necessary crypto tax forms, you need to pull together all of your cryptocurrency data that makes up your buys, sells, trades, air drops, forks, mined coins, exchanges, and swaps across all exchanges that you use.

You can do this by hand by exporting all of your trade history files from your exchanges and doing the capital gains and losses calculations for each trade. Each tax event should be recorded on form 8949 and your net gain should be transferred onto your 1040 schedule D. We walk through the manual reporting process in our article here: how to report cryptocurrency on taxes.

Crypto Tax Software

Alternatively, you can use crypto tax software like CryptoTrader.Tax to automate the entire tax reporting process.

When using crypto tax software, you simply import all of your trading and transaction history from all of your exchanges into the platform. The software will automatically sort and cleanse this data and produce your required tax forms with the click of a button.

Binance taxes

You can give these generated tax reports to your tax professional, file them yourself, or upload them into your favorite tax filing software like TurboTax or TaxAct. Learn how it works here.

Disclaimer: This article is for informational purposes only and should not be construed as tax, legal, or investment advice. Please speak to your own tax expert, CPA or tax attorney on how you should treat taxation of digital currencies.