Crypto fans can now receive their yearly tax return in the form of over 100 different cryptocurrencies, including bitcoin and ethereum. With the help of TurboTax and Coinbase, you can have your tax return check turned into the crypto coin or token of your choice.
Select details what you need to know about the new partnership, and what to keep in mind when investing in cryptocurrencies.
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How to get your tax refund in cryptocurrency
On Thursday Coinbase and TurboTax announced a partnership to allow customers to accept their tax return and have it converted into a cryptocurrency.
To get started, sign up for TurboTax and file your taxes through the Coinbase section. With TurboTax Free Edition*, you can file your taxes for free for simple tax returns that include W-2 income, earned income tax credits (EIC) and child tax credits. TurboTax also offers paid versions of its service that help with more advanced filing needs, like investment and/or business income. If you don't have a Coinbase account prior to filing your taxes with TurboTax, you will be guided through steps to have your tax return deposited with Coinbase's bank, Metabank. If you want to start trading crypto immediately, you can sign up for Coinbase account here.
* (according to TurboTax, about 37% of taxpayers qualify for this edition and it's available for Form 1040 + limited credits only)
Once you file your taxes, it will take an estimated three weeks to get your return, according to the IRS. Once your return is sent to you, you will be able to convert your USD into the crypto of your choosing.
TurboTax
Cost
Costs may vary depending on the plan selected - click "Learn More" for details
Free version
TurboTax Free Edition. ~37% of taxpayers qualify. Form 1040 + limited credits only.
Mobile app
Yes
Live support
Available with some pricing and filing options
Click here for TurboTax offer details and disclosures. Terms apply.
Pros
- Step-by-step guidance with a Q&A format that is easy to follow
- TurboTax Live provides on-demand advice and a final review from a tax expert
- Live Full Service has a tax expert prepare, sign, and file your return
- Audit support, which provides free assistance if you get an IRS or other tax notice
Cons
- More costly than other software programs
- Live expert assistance plans have additional costs
What to keep in mind with cryptocurrency
If you decide to take your tax return and invest in cryptocurrency, it's important to be aware of the risks.
First, cryptocurrency prices are volatile. In the last few months alone, bitcoin and ethereum prices fell approximately 50% from their all time highs. So if you need your tax return to pay off debt or invest for retirement, it may be best to avoid converting your tax return into cryptocurrency.
Second, crypto theft is a real issue. Roughly $14 billion in cryptocurrency was stolen last year, and unlike other financial products like credit cards, there aren't many safeguards in place for crypto owners. And while Coinbase is one of the more reputable cryptocurrency exchanges available, they aren't immune to foul play. Last year, it sent out an email stating 6,000 users had crypto stolen from their digital wallets. So by owning crypto, there is a risk you take on of having it stolen from you.
Lastly, there is anticipated regulatory action from the federal government expected in 2022, which could dramatically affect how cryptocurrency works in the United States. While there are different speculations as to what could happen, those actions could in turn affect the value of your crypto holdings.
Bottom line
TurboTax and Coinbase's partnership make it easy to turn your tax return into the cryptocurrency of your choice. However, while it may be fun to brag about your latest crypto trades with friends and family, know that it comes with real risk. If you want to play it safe, invest your tax return into an index fund within a traditional IRA, Roth IRA or brokerage account.
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