How To Do Your Bitstamp Taxes - Building Your Crypto Tax Forms
Bitstamp has become one of the largest cryptocurrency exchanges based in the U.K. Many cryptocurrency traders use Bitstamp because of its regulatory compliance and ease of use. However, when it comes to doing your Bitstamp taxes and building out your necessary tax forms based on your Bitstamp transaction history, a number of challenges arise.
This article discusses these challenges and explains the easiest way to build out your required Bitstamp and crypto tax forms.
How Do Cryptocurrency Taxes Work?
In most countries, cryptocurrencies are treated as property for tax purposes, not as currency. Just like other forms of property—stocks, bonds, real estate—you incur a tax reporting requirement when you sell, trade, or otherwise dispose of your 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 0.2 Bitcoin for $2,000 in May of 2018 and then sold it two months later for $3,000, 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 pay a certain percentage of tax on the gain. Rates fluctuate based on your tax bracket as well as depending on whether it was a short term vs. a long term gain. This applies for all cryptocurrencies.
Of course the rules vary slightly based on jurisdiction, so make sure you understand the specifics that apply within your country. We discuss the fundamentals of crypto taxes in our blog post, The Complete Guide to Cryptocurrency Taxes.
Bitstamp Taxes - Understanding the Problem
Bitstamp actually does not have the ability to provide its users with necessary tax reports that are commonly received in the world of trading stocks for a number of reasons.
The first issue is that many trades on Bitstamp are quoted in other cryptocurrencies. Because you need to be calculating the fair market value in your local FIAT currency at the time of your trades, this reporting becomes very problematic, and Bitstamp does not track original cost basis or fair market value data across trades.
The second problem—and the much bigger one—comes about from the core nature of cryptocurrency. Because you are able to send cryptocurrencies like bitcoin into and out of the Bitstamp network, for example sending bitcoin from an outside wallet into your bitstamp wallet, Bitstamp has no way of knowing at what cost (cost basis) you acquired that crypto for. Cost basis is essential data you need in the calculation of your crypto taxes.
We discussed this fundamental problem in greater depth in our blog post, The Cryptocurrency Tax Problem
So Bitstamp Can’t Provide Me With My Needed Tax Reports?
Even if Bitstamp wanted to provide you with accurate tax reports to detail your capital gains and losses, they actually physically do not have the ability to because of the cryptocurrency tax problem. This is true of all major exchanges as well like Binance, Coinbase, Kraken, and others.
So If Bitstamp Can’t Give Me My Tax Forms, How Do I Get Them?
In order 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 of the 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 transaction for each trade. This help article breaks down how to retrieve your Bitstamp trade history file. Once you have your trade history, 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: how to report cryptocurrency on taxes.
Crypto Tax Software - An Alternative Approach
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 transaction history from all of your exchanges into the platform. You can do this by dropping in your trade history file from the exchange or by connecting your account with an API key. The software will automatically sort and cleanse this data and produce your required tax forms with the click of a button.
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 for cryptocurrency or TaxAct using the CryptoTrader.Tax partnerships.
You can learn more about how CryptoTrader.Tax automates the crypto tax reporting process right here!