BEP-20 tokens can be traded on PancakeSwap, which is one of the best decentralized cryptocurrency exchanges in the world. In short, BEP-20 tokens are those that are built on top of the Binance blockchain. Unlike other currencies, they do not have their own blockchain.
Since it is built on the Binance blockchain, it has a lot of benefits. For starters, it’s fast, costs less for gas, and has been growing in a good way over the past few years.
Does PancakeSwap Report to IRS?
PancakeSwap doesn’t report to the IRS directly. One reason could be that crypto-to-crypto swapping and decentralized exchanges are not yet legal.
But they have to keep track of what their customers buy and sell and be ready for a change in the law that requires all decentralized exchanges to start reporting the numbers.
How to File Taxes with a PancakeSwap?
It’s a little harder to do with PancakeSwap because it also doesn’t let you export your transactions to a CSV file. Here are two ways you can report your PancakeSwap trades on your taxes:
Use a tax app from a third party
Use a crypto tax app, such as cryptotaxcalculator.io, koinly, or something similar. Here is where you can enter the public address of your BSC wallet that works with your PancakeSwap account.
This links the wallet to the tax software, and based on the history of transactions it receives, the tax report is automatically made using a template.
The report will figure out what you made, what you lost, what your net income is, and how much tax you have to pay.
You will still need the transaction history if you want to do your taxes by hand. In this case, you can use third-party tools that just make the CSV file of transaction history for you.
One that is suggested is BScan. You can use this file to figure out how much tax you have to pay.
Does PancakeSwap provide tax paperwork?
No, Pancake Swap doesn’t give out tax reports or financial statements of any kind. You can export your transaction history from PancakeSwap and then upload it to an automated crypto tax software that makes your report.
What Does PancakeSwap Tax Cover?
One of the most common questions asked by PancakeSwap users is whether or not every purchase or other action on the site is taxable. Let’s find out.
Trades: Since trades are considered capital gains, you have to pay taxes on them. Even if you trade one token for another, you usually still have to pay the tax.
Add/Remove Liquidity: The IRS hasn’t said anything clear about this yet. But on PancakeSwap, when you add or remove liquidity, you get a liquidity token, which could be seen as a crypto-to-crypto trade. Because of this, you might have to pay capital gains tax.
Staking Liquidity Pool Tokens: Again, the IRS has not yet given clear rules on how to do this. But since you’d get new tokens, this could be thought of as a crypto-to-crypto trade. You will have to pay taxes on any increase in value from the new tokens.
IFO: Again, the IRS doesn’t have clear rules about this. Some people say that IFO credits are not taxed because they have no value outside of the platform. But some people think that if you’ve traded CAKE for an IFO, it’s gotten more valuable, which could be considered a Capital Gain. If you want to learn more about this, you should talk to a crypto tax expert.
Lottery: There aren’t any clear rules about this yet. When you win the traditional lottery, you usually have to pay both state and federal taxes. Start by looking up the lottery rules in your area, and again, it’s best to ask a crypto tax expert.
NFT: If you sell an NFT, you make a capital gain, so you have to pay Capital Gains Tax on it. When you buy NFT, it is seen as a trade from one cryptocurrency to another, so it will be taxed as such.
How do cryptocurrency taxes work?
Don’t forget that cryptocurrency is still in its early stages and that the IRS is working hard to come up with consistent and fair tax rules for cryptocurrency.
The rules of the government say that you should pay taxes on crypto. They think of cryptocurrency as an asset (or piece of property), so the same rules apply.
When you get rid of, sell, or trade cryptocurrency, you would have to pay taxes on the gain. For example, if you buy a cryptocurrency for $10,000 and sell it for $15,000, you must pay taxes on the $5,000 profit.
On the other hand, if you report a loss when you sell cryptocurrency, that loss can be taken out of your total losses. Also, keep in mind that buying cryptocurrency is not something that is taxed. Even if the value of the coin goes up, you don’t have to pay taxes if you buy and keep it.
The IRS has been involved in this area so that investors can pay their crypto taxes in a smooth way. On form 1040, people who own cryptocurrencies must say if they bought or sold any cryptocurrencies that year.
On the other hand, cryptocurrency exchanges must also file Form 1099-K for clients who hold more than 200 cryptocurrencies and have more than $20,000 in training in that fiscal year.