How to Do Your Cash App Bitcoin Taxes
Popular peer-to-peer payment app, Cash App has become popular within the bitcoin and cryptocurrency community after the company rolled out bitcoin trading directly within the app in 2017. As is the case with all cryptocurrency exchanges, accurate tax reporting is a challenge for bitcoin investors as Cash App does not track your cost basis effectively.
In this guide, we walk through the exact process behind how to do your Cash App taxes for your bitcoin trades.
Crypto and Bitcoin Taxes 101
In the U.S., the IRS treats bitcoin and other cryptocurrencies 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 0.4 Bitcoin for $2,000 in June of 2019 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.
Alternatively, 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.
We go through everything you need to know about crypto taxes in our guide: The Complete Guide to Cryptocurrency Taxes.
Cash App Tax Reporting (Understanding the Problem)
At the end of the year (by Feb. 15th), Cash App sends you a 1099-B tax form that details the buys, sells, and trades of your bitcoin. This is the form that you typically plug into software like TurboTax or give to your accountant to calculate your gains and losses from your trades.
However, for many Cash App users, the “Cost Basis” field of this 1099-B will be completely blank. This happens when Cash App doesn’t know how you originally acquired your bitcoin (i.e. it doesn’t know your cost basis), and it’s a common problem for crypto exchanges.
We go into depth about this problem in our blog post: The Cryptocurrency Tax Problem.
Essentially, if you ever transferred bitcoin into or out of your Cash App wallet, Cash App loses the ability to track your cost basis. When this happens, it leaves the field blank in your 1099-B which makes this document useless for capital gains and losses reporting.
Below is an image of a Cash App 1099-B. See that the ‘cost basis’ field is blank for every single transaction.
So if the Cost Basis Field is Blank On My Cash App 1099-B, It’s Useless?
Correct. You will not be able to solely rely on this 1099-B form to calculate your bitcoin gains and losses without cost basis data.
If Cash App Can’t Provide Me With My Needed Tax Reports, How Do I Get Them?
The solution to this problem is to aggregate all of your data from all of the platforms you used to buy, sell, trade, or transact in virtual currency.
For example, if you bought BTC for $5,000 on Coinbase and then sent it to your Cash App wallet to sell it for $6,000, you know you have a $1,000 capital gain. You can detect your gain when you combine transaction records from both Coinbase and Cash App. In this example, your cost basis for the bitcoin you sold was $5,000 (from the original Coinbase purchase).
You can do this data aggregation by hand by exporting all of your trade history files from your exchanges and doing the capital gains and losses transaction 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 your taxes.
Cryptocurrency Tax Software
By simply connecting all of your exchanges and crypto platforms (Cash App being one of them), you can import your historical transactions into your account with the click of a button. CryptoTrader.Tax aggregates all of your transactions and properly assigns cost basis values for all of your taxable events.
The software will do all of the number crunching for you. With a matter of clicks, you can have your crypto tax reports ready to send off to your accountant or import them into tax filing software like TurboTax or TaxAct.
Below is a short video showcasing how you can import your Cash App transactions into CryptoTrader.Tax to generate your tax reports.