How to Do Your Robinhood Taxes

Cryptocurrency Tax 101

Most governments recognize cryptocurrencies such as Bitcoin as property rather than cash for tax reasons. A tax reporting obligation is imposed on you when you sell or otherwise dispose of your Bitcoin for a higher or lower price than you paid when you bought it.

To learn more, check out our Crypto Tax Guide 2022.

For tax reasons, cryptocurrency trading is very much like stock trading. And just like stock traders need tax pros to help them keep more of their earnings out of the hands of the IRS, so do crypto traders. Drop in for a free one hour consultation with a Yoke Tax professional.

Taxes on Robinhood

If you’ve been investing for a long time, you presumably already know how and where to record your Robinhood income. If you’re putting your toe in the financial waters for the first time, though, there are a few things you should know. When filing a Form 1040, interest or dividend income are reported on a Schedule B. The directions on this form will explain to you how to complete it or where to submit your final figures on your 1040.

Stocks and cryptocurrencies that you sell via Robinhood get recorded on the Form 1040 Schedule D. Depending as to how many trades you make over the year; your Schedule D might get extensive. You may make your life considerably simpler at tax time if you deal with a CPA or a tax software vendor that allows you to submit any Forms 1099 you get. Robinhood expressly works with TurboTax to make inputting your tax information easier, but you may be able to utilize other tax software as well.

(Or, better yet, a tax pro. Nudge nudge. Free one hour consultation.)

Why Is Robinhood Different?

Because Robinhood is not a native crypto firm, all "crypto transactions" presently occur within the Robinhood platform. You can't now transmit the BTC you purchase from Robinhood to an external wallet of your choosing. Additionally, you cannot transfer BTC from an external wallet to a Robinhood account.

Even though many consider this "anti-crypto," Robinhood can supply its consumers with the proper tax documents at the end of the year.

Coinbase and Gemini are "native" cryptocurrency exchanges. Still, Robinhood is the only one that keeps track of all your crypto gains and losses since every transaction—buy, sell, or any other kind—took place within its boundaries.

There are only a few crypto exchanges that can achieve this. You have complete control over when and where your cryptocurrency is sent and received. Coinbase will no longer be able to provide you with comprehensive wins and losses reports if this occurs. In our blog article, we detail this issue: Why users can't get correct tax returns from Bitcoin exchanges.

Eventually, Robinhood will have to deal with the same tax reporting issues as other crypto exchanges. A new cryptocurrency wallet from Robinhood has just been revealed. Transaction data from Robinhood users will now be scattered over other crypto platforms, making it more difficult for them to file taxes.

Robinhood 1099-B

A comprehensive form (1099-B) indicating investors' capital gains and losses for the year is currently available to Robinhood members.

It's as simple as logging into your Robinhood account and grabbing a copy of your 1099-B. Your Robinhood 1099-B may be imported into TurboTax or given straight to your tax professional so they can file it for you, much like other tax records received at year-end (W2, etc.).

This 1099-B does not require import into a crypto tax program at this moment. Again, this is because Robinhood provides you with a 1099-B, which lists your profits, losses, cost basis, and earnings. Including this information twice on your tax return is unnecessary.

What If I Use Other Exchanges in Addition to Robinhood?

For tax purposes, if you utilize Robinhood and other traditional cryptocurrency exchanges, you will need to aggregate those transactions from those other exchanges.

When distributing this paperwork, native cryptocurrency exchanges have a difficult time. Fortunately, there is a more straightforward method. Tax reports may be generated at the push of a button using Bitcoin software.

You shouldn't include any Robinhood trades in these aggregated data now, unfortunately. Robinhood is a crypto-only trading platform, and it should be treated as such.

If you are looking for more information, please don’t hesitate to get in touch with Yoke tax free one hour consultation.

A New Line of Robinhood Wallets Is on The Way.

Users will soon be able to send and receive cryptocurrencies outside the Robinhood platform, which was revealed on September 22, 2021.

Users of Robinhood will undoubtedly find tax reporting more complex when wallets are implemented. If you sell cryptocurrency on Robinhood that was obtained elsewhere, Robinhood will not be able to compute your capital gains since it doesn't know your initial cost basis. 

Are You in Need of Expert Guidance?

Basic investment is easy to learn on the Robinhood platform, but its main aim is to ease trading. To ensure that the tax effects of your transactions are properly understood, they do not offer this service. It's a good thing that Yoke tax free one hour consultation exists! We're ready and eager to fill in the gaps left by Robinhood in terms of assistance and tax guidance. Contact one of our experienced CPAs now, and we'll make sure you don't run afoul of the Internal Revenue Service.