Why cashing out your Robinhood account might have cryptocurrency tax liabilities
Earlier this year, Robinhood halted trading of certain stocks and suspended cryptocurrency, citing market volatility. Leaving the Twitterverse and customers wondering they should withdraw their crypto from Robinhood. The challenge there is — Robinhood doesn’t allow customers to withdraw or transfer crypto to another exchange or wallet.
They are leaving Robinhood cryptocurrency customers who were looking to withdraw their crypto facing a tough decision. To withdraw their crypto, they need to convert it to USD, thus triggering a taxable event during a time when the market, including alts like Doge, is at an all time high.
Cashing out on Robinhood creates a taxable event
Unfortunately, by converting your bitcoin to USD, you’re selling it, thus triggering a taxable event.
Here’s an example: Let’s say you purchased One bitcoin for $18,000 on Robinhood, and now it’s worth $34,000. Because you can’t withdraw BTC from Robinhood, you’ll need to convert it to USD and then go to another exchange or wallet to repurchase the bitcoin.
In this example, you would owe capital gains tax on $16,000 of gains ($34,000 — $18,000). Because the crypto market has been experiencing all time highs, anyone selling would likely incur a tax liability.
How to optimize Robinhood cryptocurrency gains and losses
The good news is TaxBit provides crypto enthusiasts real-time portfolio tracking and tax optimization visibility so that you can make tax optimized crypto trades throughout the year. If you are looking to stay IRS compliant, have real-time portfolio visibility, and save money on cryptocurrency taxes, then TaxBit is the platform for you.
Robinhood will provide you with a CSV of your transactions, which you can import to your TaxBit account. From there, our Tax Optimizer will populate your tax gains/losses for these transactions and help stay on top of your expected gains and losses throughout the year. We have real-time cryptocurrency pricing which empowers you to strategize your buys and sells accordingly throughout the year. Link all your exchanges and wallets to pull your transactions and maintain real-time data throughout 2021 seamlessly.
How to file cryptocurrency taxes with TaxBit
TaxBit brings all of your cryptocurrency transactions and balances from your exchanges and wallets into one place. We then run those transactions through our TaxBit engine (which was built by CPAs, tax attorneys, and developers) and calculates the cost basis and corresponding gains or losses on every transaction. We provide a full audit trail so that users, accountants, and auditors can drill down into any transaction to see precisely how the gain or loss was calculated. From here, you can then download your required IRS 8949 tax forms from within your account!
Tax season is here. Sign up for a TaxBit account today, link your exchanges and wallets to seamlessly pull your transactions, run the appropriate calculations, and auto-generate your tax forms for the 2020 tax year! Save 10% https://bit.ly/TabBitSave10