Crypto veterans and novice crypto traders have begun to take notice of Binance, considering it is the largest cryptocurrency exchange by trading volume.
The Binance platform has a cryptocurrency to its name called Binance Coin. The BNB symbol is used to denote this cryptocurrency. Binance coin is known to be based on the Ethereum blockchain and shares similarities with Ether.
Benefits of Binance
One of the primary benefits of BNB is the fact that traders can get a discount when committing to orders on the exchange itself. The default fee every crypto trader gets is a fixed 0.1% for every committed trade. This happens to be much lower than the default fees for other cryptocurrency trades.
BNB coin finds itself in the top 10 on Coinmarketcap. It has the potential to grow further. As a result, new crypto exchanges and the formidable ones alike have listed BNB.
What is Binance used for?
These days, Binance has proven to be useful in a variety of situations, including the following:
- Paying transaction fees
- Purchasing IEO tokens
- Taking care of travel expenses
The BNB token is used for trading on the Binance trading platform. If you are trading in Binance coins, you can avail a discount of 25% on trading fees compared.
Binance introduced its launchpad Initial Coin Offering (ICO) platform, where users can directly invest in vetted ICOs on Binance. Binance has changed the rules to a lottery-based system in which users will be selected at random to participate in the ICO’s. However, they have to own a BNB coin.
Binance coin is generally used to pay the fees levied by Binance exchange for the provision of said services. Examples of these fees are trading fees, exchange fees, and listing fees.
Binance was launched in 2017. It is vital to understand how Binance is taxed, and what the Internal Revenue Service’s (IRS) has to say about Binance tax. As you may have guessed, the IRS treats Binance tax as property for tax purposes, as is the case with other cryptocurrencies.
What do you need to know about Binance Taxes?
Seeing how Binance is increasingly used for transactions, it is critical to understand how Binance Tax works. Binance no longer allows crypto traders from the US on their original site. However, they recently launched a new website for the United States called Binance.US.
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How Binance tax reporting works
Building your Binance tax forms and filing Binance taxes is not as easy as you might expect. It is challenging to get the necessary Binance tax reports for a variety of reasons.
All Binance trades are carried out in cryptocurrency. This means you need to calculate the fair market value in a Fiat currency when you sanction your trades. Unfortunately, Binance does not have a record of this data, which is why calculating your Binance taxes is taxing.
Also, Binance does not have a way to find out the cost basis at which you bought or sold your crypto. Cost basis is critical if you want to calculate your Binance taxes.
To make sure you build your Binance tax forms, be sure to consolidate all your Binance data. This data includes your purchases, sales, trades, mined coins, airdrops, forks, exchanges, and swaps.
How to pay your Binance Tax?
Firstly, export your trade history files and calculate your capital gains and losses for every trade you have carried out.
You need to record every tax event on the 8949 form and declare your net gain on the 1040 schedule D form. Alternatively, make sure you calculate your Binance taxes by employing a crypto tax software that automates the crypto tax filing process.
Paying your Binance Tax with Crypto Tax Software
Here are some excellent crypto tax software you can use to pay your Binance taxes.
CryptoTrader.tax allows crypto traders to calculate capital gains or losses without hassle. It supports 20 direct connections to crypto exchanges, including Coinbase, Bittrex, Gemini, Binance, etc. If the user is from an unsupported exchange, they can upload their trading data through the CryptoTrader’s generic exchange template.
Once your trades are imported, CryptoTrader will calculate your tax liability using the ‘first-in-first-out’ (FIFO) method that CPAs use. Users are generally provided with exportable tax documents for filing (which include IRS Form 8949) your cryptocurrency income after your crypto taxes are calculated.
A feature worth noting is CryptoTrader’s audit trail. This is known to detail every calculation you use in your tax filing report to receive your proceeds and the net cost basis. The audit trail report includes short and long term sales, closing positions, total income, etc.
CoinTracker is a popular crypto tax reporting software and a hybrid crypto-asset tracker. The software is known to automatically sync your transactions and asset balances from the crypto exchanges you make use of, or from your digital wallet, keep your crypto-activity information on up to date.
It also provides a tool called performance tracker, which is used to track your investments. This will give you a clear picture of how well your crypto investment is performing over time. Some other features that CoinTracker is known for include cost basis reports, capital gains, auto-synchronization with exchanges, and wallets. It also has tools like TurboTax that enable access to your Coinbase account from within the software.