Robinhood is a tool that helps you trade in stocks, Cryptocurrency and other securities. Since, the platform allows you to earn profits and I hope you know with profits always comes the taxes. Therefore, it is important to file Robinhood taxes. Do you know the consequences if you will not file Robinhood taxes? If not, then you must read this article to understand the nuances of Robinhood Taxes.
What happens if you don’t report your Robinhood Taxes?
Reporting Robinhood Taxes is necessary otherwise you will have to face actions of Internal Revenue services. They may impose a penalty on you for your inability to file Robinhood Taxes. In case you don’t report your Robinhood Taxes, the IRS will consider that you are earning profit on all of your transactions, therefore you will have to pay taxes on all transactions if you incur losses.
How do Taxes work on Robinhood Stocks?
The taxation system for the Robinhood Stocks is like any other Capital asset. When you sell any stock above its cost price, you earn a profit on it. The IRS considers Stocks as a Capital Asset, and the profits on those stocks as Capital Gains. You will have to pay taxes on all of your Capital Gains and the same is the case with Robinhood Stock gains. And, In case you incur losses in selling those stocks, you deduct that amount during calculation of your total income as it happens with other capital losses.
How do Taxes Work on Robinhood Cryptocurrency?
The IRS treats cryptocurrency also as a Capital asset. You have to pay taxes on all your gains when you sell cryptocurrency in the Crypto Market. Similarly, you can deduct the losses you incur in sale of the Cryptocurrency from your total taxable Income.
How do you Pay Taxes on Robinhood Stocks?
Robinhood compiles all of your Capital Gains and Losses and provides you the data in a report. At the end of every financial year, the users who are liable to pay taxes receive a form called Form 1099. By filling this form you can report your gains and deduct your losses and then pay the pending tax amount which the authority will levy on you. The taxation system is applicable on you only if your capital gains are more than 10$.
Robinhood Tax Documents
Tax documents are essential for everyone to understand their Capital gains which are taxable in nature. You can read about various tax documents that Robinhood provides through this link. There are seven major forms that Robinhood may send you, these include:-
- Form 1099
This form is given to only those individuals who have received Capital Gains more than 10$ by selling their assets. The form gives information about your taxes and the amount of money you have got from selling your stocks, cryptocurrency or dividends.It also mentions the washoff loses,
- Form 1099-C
You may receive this form if you have canceled 600$ or more of debt which someone was owing to you.You will have to file this form if you satisfy the conditions given in this link.
- Form 1099-R
The IRS can ask for Form1099-R for reportable distributions from individual retirement accounts. Therefore, this form will not be given to you but will be given to the IRS by Robinhood.
- Form 5498
The IRS may ask you to file this form if you have recharacterized any investment , have rollover contributions. The form is to apply a year end fair market value on such transactions and levy taxes.
- Form 1042-S
If you are a non-resident of the US, you will receive this form. The IRS requires every non-US person to file this form to collect reports on income sourced from the US.
- Form 480.6
You will receive this form if you receive payment from a company which has a domicile of Puerto Rico. You will also receive this form if you are a resident of Puerto Rico for the financial year.
- Form 2439
The form 2439 is given to you if you own a long-term specific mutual fund or Real estate investment trust. This is a notice that is given to you if you satisfy the given conditions.
When does Robinhood release Tax Documents?
If you are liable to pay taxes on your income through Capital Gains then only you will receive tax documents. Robinhood releases these documents by 15th February of every financial year. The documents will be sent to you in a single pdf to avoid multiplicity.
What Time do Options expire?
Options in trading close on a fixed day. Generally, it is the third Friday of the expiration month after which the options expire. Option contracts can vary from exchange to exchange and it also depends on your exchange, security and other factors.
How much is the Robinhood ACATS Transfer Fee?
ACATS transfer allows you to transfer your entire holdings to another broker. There is a fee of 100$ that Robinhood levies on such transfers whether partial or full. You can transfer your stocks, securities with this feature. Currently, it does not allow the exchange of Crypto holdings, maybe in future you may get this option as well.
Conclusion
Paying Robinhood Taxes is a necessary task that you must perform if you gain something by selling your investments.I hope by reading this article, you are now aware of the entire procedure of paying Robinhood Taxes. Apart from the procedure, the article also makes you understand the consequences of not filing Robinhood Taxes.
