How do I file my taxes?
Information provided by PayPal is not intended to be and should not be construed as tax advice. For questions about your specific tax situation, please consult a tax professional.
The information provided by PayPal is not intended to be and should not be construed as tax advice. You should consult your tax advisor regarding which cost basis method is appropriate for your specific situation.
Here is a list of documents necessary to have when preparing your annual tax returns with the IRS:
- IRS 1099-MISC
- For U.S. taxpayers, the IRS requires companies that make certain types of payments to provide the recipient of such payments and the IRS with a 1099-MISC. This form provides information for a wide range of income payments such as interest earned on digital currencies, referral bonuses, and other income. If you’ve earned $600 or more this year in crypto interest or bonuses, the 1099-MISC will be made available by the platform that issued the payments during the taxable year.
- PayPal will only send this form to you by January 31, if applicable for the preceding years payments.
- For U.S. taxpayers, the IRS requires companies that make certain types of payments to provide the recipient of such payments and the IRS with a 1099-MISC. This form provides information for a wide range of income payments such as interest earned on digital currencies, referral bonuses, and other income. If you’ve earned $600 or more this year in crypto interest or bonuses, the 1099-MISC will be made available by the platform that issued the payments during the taxable year.
- US tax form 8949
- When you sell/trade cryptocurrency for a profit or loss, the IRS requires the details of the transaction to be reported on Form 8949, “Sales and Other Dispositions of Capital Assets”.
- The Transaction Statement summarizes the information that should be included on your IRS 8949. Your Transaction Report will detail each asset you bought or sold throughout the year. This form reports your cost basis, when available, for the assets you bought and sold on the platform.
PayPal calculates the cost basis (based on Highest In/First* Out cost basis method) and corresponding gains or losses on every transaction. PayPal simplifies tax reporting by generating a .CSV file (Gains/Loss Statement) for you with information that is typically provided on Form 8949 for you, which will reconcile to your transaction Summary. The information provided by PayPal is not intended to be and should not be construed as tax advice. You should consult your tax advisor regarding which cost basis method is appropriate for your specific situation.
*Highest cost does not consider the length of time you held your crypto assets. If your position is made up of several tax lots and they consist of both long- and short-term holdings, highest cost may deliver the lowest gains, but not the lowest tax rate, due to the difference between short- and long-term capital gains tax rates.