Cash App

In this post, we’re tackling a subject of personal finance – Cash App taxes. So, grab your virtual coffee and join us as we navigate the ins and outs of handling your taxes in the digital age. Whether you’re a seasoned Cash App user or just dipping your toes into the world of digital transactions, we’ve got you covered. Let’s break down the complexities and make tax season a breeze. Welcome to the intersection of finance and technology – let’s get started.

In the year 2013 Square, Inc. launched Cash App, a peer-to-peer payment application. Since then, Cash App has grown to become one of the most widely used payment applications in the United States, with over 70 million users as of 2021. Cash App’s mobile application can be downloaded from both Apple App Store and Google PlayStore.

Square, which is headquartered in San Francisco, California, started to offer payment technology, payroll software, and other services to restaurants and other microenterprises in 2009.

Connecting Your Cash App To ZenLedger For Your Crypto Tax Forms

As one of the most comprehensive cryptocurrency tax software options on the market, we have import instructions for well over 400+ exchanges. 

Within ZenLedger, select the Exchange you want to import on the Import Transactions page and Exchanges tab. Then you’ll see a table that outlines the possible methods. For many centralized exchanges, we support a direct API code import, while others may require a CSV import. Decentralized exchanges may require a wallet address.

To import your transactions from an exchange, simply navigate to the [Exchanges] tab of the [Imports] page. Select the exchange that you are looking to import, (Cash App, in this case) and instructions will be provided for that specific exchange!

How Does Cash App Work?

Cash App functions as a comprehensive financial platform, utilizing partnerships with banks and serving as a registered broker-dealer through Cash App Investing LLC. Users can seamlessly send and receive money on the platform, with fee-free transactions and options for both standard and instant transfers.

The Cash Card, a free Visa debit card linked to the Cash App balance, enhances user accessibility. It allows for ATM withdrawals (with a fee, waived for direct deposit) and online or in-store purchases. Cash App Pay extends its functionality as a payment method for transactions at Square Sellers and select merchants.

For investments, Cash App enables users to buy stocks and ETFs without commission fees. Additionally, it facilitates cryptocurrency transactions, allowing users to buy, sell, and transfer Bitcoin—this amalgamation of services positions Cash App as a versatile and user-friendly platform for various financial needs.

After looking at how does Cash App works, let’s look at Cash App taxes. 

Cash App Taxes

According to the Notice 2014-21 issued by the IRS, bitcoin and other cryptocurrencies are taxable as property in the U. S., much like stocks and real estate.

Whenever you sell Bitcoin, you’ll make capital gains or losses based on how much the value of crypto has varied since you first got it. The taxes you owe on making crypto transactions on the Cash App are termed Cash App taxes.

Will Cash App Provide me with Tax Forms?

At present, any user who had sold Cryptocurrency in the previous year receives a 1099-B from Cash App. The gross revenue from your Crypto sales is reported on this form.

But one crucial thing to note is that the cost basis section of the 1099-B is frequently left blank. If you ever traded bitcoin out and into Cash App, your Cash App 1099-B is likely to have unfilled cost basis sections. When it comes to tax accounting, this is a concern as a cost basis is needed to calculate your profits and losses.

Does Cash App Provide Information to the IRS?

Yes, any 1099-B form dispatched to a Cash App user is simultaneously forwarded to the IRS.

It’s crucial to emphasize that attempting to work around cryptocurrency taxes is not legal. Failure to file cryptocurrency taxes is regarded as tax fraud, carrying potential consequences of a maximum penalty of $100,000 and the prospect of incarceration.

Why Don’t I Receive the Full Tax Form from Cash App Tax?

Almost all crypto exchanges have procedures similar to Cash App tax when it comes to tax reporting.

Crypto investors usually transfer their holdings to other exchanges and wallets due to the peer-to-peer nature of cryptocurrencies. Unfortunately, because exchanges do not have access to customer transactions that occur across platforms, they can’t give accurate tax reporting. So is the case with Cash App.

Thankfully, there is a better option for investors to properly submit their Cash App taxes. ZenLedger easily calculates your crypto taxes and also finds opportunities for you to save money and trade smarter. Let’s find out how to do your Cash App taxes with the help of ZenLedger.

Benefits of Using Cash App

Using Cash App for your financial transactions can offer several benefits when it comes to managing your taxes:

1. Transaction Tracking: Cash App provides a clear and detailed transaction history, making it easier for you to track income and expenses when preparing your tax documents.
2. Electronic Records: With digital receipts and transaction records stored in the app, you can reduce the risk of losing paper receipts and have organized electronic records at your fingertips.
3. Simplified Expense Categorization: You can categorize transactions within Cash App, helping you easily identify and differentiate between personal and business expenses, streamlining the process of calculating deductions.
4. Direct Integration with Accounting Software: Many accounting software platforms can integrate directly with Cash App, simplifying the process of importing your financial data and minimizing manual data entry errors.
5. Instant Access to Statements: Cash App provides the option to access and download monthly statements, providing a concise overview of your financial activity that can be useful for tax reporting purposes.
6. Efficient Payouts and Reimbursements: If you’re managing business expenses, Cash App’s quick transfer features can facilitate efficient payouts and reimbursements, ensuring that your financial transactions are well-documented.

Common Mistakes to Avoid When Filing Cryptocurrency Taxes

Filing cryptocurrency taxes can be intricate, and individuals often encounter pitfalls that can lead to complications with the IRS. Here are some common mistakes to be aware of, along with tips on how to sidestep them:

1. Overlooking Small Transactions

Neglecting to report small cryptocurrency transactions, such as minor trades or purchases, is a prevalent error. To avoid this, it’s crucial to keep meticulous records of all transactions, irrespective of their size. Utilize accounting tools or apps to track every instance, ensuring a comprehensive and accurate tax report.

2. Not Considering the Cost Basis Correctly

Incorrectly determining the cost basis of your cryptocurrency holdings can lead to miscalculations of capital gains or losses. To address this, maintain detailed records of the acquisition cost of each cryptocurrency, including fees and other expenses associated with the purchase. Consistently update this information to accurately calculate gains or losses when selling or trading.

3. Failure to Report Crypto-to-Crypto Trades

Some users mistakenly believe trading one cryptocurrency for another is a non-taxable event. To avoid this error, it’s crucial to understand that crypto-to-crypto trades are taxable events. Report these transactions accurately by recording the fair market value of the cryptocurrency at the time of the trade.

4. Not Seeking Professional Guidance

Some users may attempt to navigate complex tax regulations without seeking professional advice. To avoid potential pitfalls, it’s advisable to engage a tax professional with expertise in cryptocurrency taxation. They can provide tailored guidance, ensuring compliance with current tax laws and regulations.

5. Ignoring IRS Guidelines and Updates

Failing to stay informed about IRS guidelines and updates regarding cryptocurrency taxation is a common mistake. To stay ahead, regularly check for IRS announcements and updates related to cryptocurrency taxes. Stay informed about any changes in regulations that may impact your tax obligations.

6. Not Reporting Crypto Taxes at All

Perhaps one of the most significant mistakes is not reporting cryptocurrency taxes at all. Failure to file taxes on cryptocurrency transactions is a serious offense and can lead to legal consequences, including penalties and potential jail time. To avoid this, prioritize compliance and ensure that all cryptocurrency transactions are accurately reported in your tax filings.

7. Failure to Keep a Record of Your Transaction History

Neglecting to maintain a comprehensive transaction history can lead to confusion and errors in tax reporting. Keep detailed records of all transactions, including dates, amounts, and counterparties, to provide a clear and accurate overview of your cryptocurrency activities.

8. Missing out on the Benefits of Tax Loss Harvesting

Overlooking tax loss harvesting, a strategy to offset gains with losses to reduce overall tax liability is a missed opportunity. Be proactive in identifying potential losses in your portfolio and strategically use them to optimize your tax situation.

The Bottom Line

Cash App is among the finest money apps for individuals you trust to conduct personal transactions. As per the Cash App official site, payment information is encrypted and routed through secure networks. You must take extra precautions to guarantee that no one uses your phone to send money without your consent. 

Cash App suggests securing your phone with a password and turning on the in-app passcode lock, which requires a biometric or PIN for each payment.

Cash App Taxes FAQs