How To Do Your Uphold Taxes - Building Your Crypto Tax Forms
Uphold has become one of the leading cryptocurrency platforms and exchanges on the market today. With commission-free trading and a striking new interface that allows you to trade any supported asset within 10 seconds, Uphold has attracted hundreds of thousands of cryptocurrency investors to its platform.
One difficulty that exists for all cryptocurrency exchanges including Uphold is tax reporting. Due to the transferable nature of crypto, cryptocurrency exchanges like Uphold don’t have the ability to automatically provide users with capital gains and losses documents needed for crypto tax reporting. This guide breaks down why this is and explains how you can still successfully do your Uphold taxes and build out your necessary crypto tax reports.
Cryptocurrency Taxes 101 - How Does it 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.
As a result, cryptocurrency trading looks similar to stock trading 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 would 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 Ultimate Guide To Cryptocurrency Taxes.
Uphold Taxes - Understanding the Challenge
The first challenge in the world of crypto tax reporting is the fact that many trades on cryptocurrency exchanges like Uphold 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 becomes difficult to report on.
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 Uphold network, for example sending bitcoin from an outside wallet into your Uphold wallet, Uphold 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. It’s for this reason that Uphold along with all other major exchanges struggle with giving commonly received tax reports like 1099-B to their users.
We discussed this fundamental problem in greater depth in our blog post about cryptocurrency tax reporting challenges for exchanges.
Crypto Exchanges Can't Automatically Provide Capital Gains and Losses Reports
Because of the transferable nature of cryptocurrencies discussed above, exchanges like Uphold don't have the ability to provide accurate tax reports detailing your capital gains and losses. We discuss this conondrum further in our blog post: The Cryptocurrency Tax Problem. This is true of all major exchanges like Binance, Coinbase, Kraken, and others.
Some Uphold users will receive a Form 1099-K at the end of the year (if you had 200+ transactions and more than $20,000 in aggregate transactions). Because this document does not detail cost basis, it isn't helpful for reporting capital gains and losses. You can learn more about how 1099-K works and what you should do with it here.
So How Do I Get My Necessary Tax Reports?
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 and platforms 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 Uphold 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
Alternatively, you can use cryptocurrency specific 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 Uphold account directly. The software will automatically sort and cleanse your historical transaction data and produce your required tax forms with the click of a button.
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!