How to get your tax refund in crypto

Wondering if it’s possible to get your tax refund in crypto? Well, the good news is you can! If you got a nice refund this year and want to put it toward crypto, there are a couple options for you to do so.

While the IRS does not issue refunds in crypto directly, there are a couple third-party software platforms that help you receive your tax refund in crypto. Below, we’ll discuss what these options are, as well as the pros and cons of getting your refund in crypto.

How difficult is it to get your tax refund in crypto?

TurboTax and Coinbase

The most popular way of getting your tax refund in crypto is through TurboTax. In early 2022, the tax filing platform announced a partnership with Coinbase that allows Coinbase users to receive their tax refund in the cryptocurrency of their choice when they file through TurboTax.

And luckily, the process to get started is easy. First, you’ll need to choose TurboTax as your tax filing software. TurboTax is very crypto-friendly, making it a great choice for crypto users. They partnered with CoinTracker in early 2022 to allow crypto users to import their tax information directly from several popular crypto exchanges.

Navigate to the Coinbase section of TurboTax’s website to get started filing your taxes. Once you reach the end, TurboTax will ask you how you’d like to receive your refund. Choose the direct deposit option. Then, choose Coinbase as the direct deposit option. 

Here, instead of entering your bank account and routing numbers, you’ll input your Coinbase account information and select Coinbase’s bank “Metabank.” If you don’t already have a Coinbase account, TurboTax will prompt you to set one up. 

Once you input the information, you’ll be asked what type of cryptocurrency you want your refund in. 

That’s it! Then, once your refund is processed by the IRS, it will be automatically sent to your Coinbase account in the crypto you chose.

Now, it’s important to note that the IRS is not issuing your tax refund in crypto directly. Instead, the refund is sent to Coinbase, which converts it from USD to your chosen crypto.

CoinRT

So, what if you don’t use Coinbase or TurboTax? Are there any other ways to get your tax refund in crypto?

The only other option is a service from Refundo called CoinRT. Refundo is a tax service for tax businesses that acts as a middleman between the business and the IRS. It can be used with any tax software, including popular options like TurboTax, TaxAct, and CreditKarma.

It works when a tax business or software creates an account with Refundo and purchases the CoinRT service. Then, the tax service provider will receive a unique routing and account number from Refundo. 

The individual filing their taxes will enter this routing number when they file. Then, after the IRS processes their return, Refundo will receive the tax refund and convert it to Bitcoin (this is the only cryptocurrency option they offer at the moment). 

Refundo will then deposit the individual’s refund directly into the crypto wallet they indicated when they signed up with the tax business or software. 

Refundo can send funds to popular wallets like BitPay, Coinbase, Kraken, and Trezor.

What are the benefits of getting your tax refund in crypto?

Why should you consider getting your tax refund in crypto? The main benefit is being able to reinvest that money into a digital asset you’re passionate about or using it for a blockchain project or DeFi services, like lending or staking.

If you don’t need your refund money for anything specific or any particular expenses, investing it is a great way to grow it. For crypto enthusiasts, getting their tax refund in cryptocurrency is a more convenient way to put that money to use. 

Is it risky to get your IRS refund in crypto?

The main downside to getting your tax refund in crypto is volatility. There’s always a risk that whatever you get back in your refund will be worth less by the time you convert it to crypto. 

Of course, the opposite scenario could also take place. In the end, this is why you should always follow the typical investment advice of only investing what you can afford to lose.

Will it be easier to get your tax refund in crypto in the future?

Aside from CoinRT and TurboTax, the only other option to get your tax refund in crypto is to manually transfer it to your wallet and convert it to crypto by yourself. But will there be more options in the future?

Following the lead set by TurboTax’s partnership with Coinbase in early 2022, there will likely be more tax services that help people get their refunds in cryptocurrency. Especially as digital assets continue to gain popularity and the decentralized web keeps growing, there will likely be a growing demand for more crypto-friendly tax services.