What tax forms do I need for crypto?
28 Mar, 2023 · 6 min read
Trading comes with tax reporting obligations, but what tax forms do you need for crypto?
Digital assets are taxed in the US, and depending on the activity, you’ll be expected to report using different forms.
Today, tools like CoinTracking help you track all of your crypto gains/losses and income/expenses, while services like TurboTax make it easy to file your returns.
But, first, let’s clarify how crypto is taxed and what forms you need for cryptocurrency.
In this article:
- How to report cryptocurrency on taxes?
- Where do I report crypto transactions on my tax return?
- How do I fill out Form 8949 for cryptocurrency?
- Learn how to generate tax reports with CoinTracking
- Do I need to file crypto taxes if I lost money?
- Do you have to pay taxes on crypto if you reinvest?
- Do I have to report crypto if I didn’t sell it?
- What happens if you don’t report cryptocurrency on taxes?
- Can the IRS track Bitcoin?
- Which crypto exchanges do not report to the IRS?
- Will I get a 1099 from Coinbase?
- Do you need a 1099-B for crypto?
- How do I avoid crypto taxes?
- The best crypto tax software: CoinTracking
- Crypto taxes with no errors: CoinTracking Full Service in the US
How to report cryptocurrency on taxes?
In the US, cryptocurrency is taxed at the capital gains and income level, depending on the type of transaction.
Every crypto-to-FIAT or crypto-to-crypto trade is a taxable event, subject to capital gains taxes, ranging from a 0% to 37% tax rate, depending on your holding period and other factors.
However, earning crypto is usually taxed at the income level, with the final tax rate depending on your total taxable income.
Here are examples of some common crypto transactions that are taxed at the ordinary income level:
- Receiving an airdrop
- Receiving new coins from a hard fork
- Earning crypto interest
- Receiving crypto staking rewards
- Receiving a salary in bitcoin
- Mining crypto
- Receiving payment for services as a contractor/freelancer in crypto
- Receiving crypto payment from selling a product
- Receiving sales proceeds in crypto for selling an NFT you created
- Receiving gaming or gambling winnings in crypto
Find out more details on how to report crypto.
Where do I report crypto transactions on my tax return?
In the US, crypto trades taxed at the capital gains level will need to be reported on Form 8949 and Schedule D of your Form 1040.
Every crypto income you received during the tax year (e.g., airdrops, staking rewards) will have to be reported on an appropriate form, such as Schedule B (for interest) and Schedule 1 (for miscellaneous income) of your income tax return.
How do I fill out Form 8949 for cryptocurrency?
Here are the steps to fill out Form 8949 for crypto:
- Import all of your crypto trades into a crypto tax software such as CoinTracking
- Determine the gain/loss on each trade alongside all the related information (e.g., date of acquisition, date of disposal, cost basis, sales proceeds)
- Assess each gain/loss to determine whether it’s considered short-term or long-term
- Report the trades with the necessary information (e.g., date of acquisition, date of disposal, sales proceeds, cost basis) on Form 8949
- Report each trade in the appropriate section of Form 8949 based on its short-term or long-term status.
- File your tax reports
Learn how to generate tax reports with CoinTracking:
If you have any doubts on generating tax reports with CoinTracking, please check our comprehensive FAQs here.
Do I need to file crypto taxes if I lost money?
Yes. Each time you sell crypto, you need to report that trade, regardless of whether it has a gain or a loss.
If you have losses from crypto or NFT trading, you can use the loss to offset your capital gains and claim up to $3,000 of net capital loss deduction each year.
Do you have to pay taxes on crypto if you reinvest?
Yes, if you sell your crypto, you’ll need to report that trade, even if you immediately reinvest your proceeds in another cryptocurrency. The first trade (sale) is a taxable event, subject to capital gains taxes.
The tax rate will depend on your holding period of that crypto and other factors.
Do I have to report crypto if I didn’t sell it?
No, if you buy bitcoin or other crypto and simply hold it, you don’t have to report it or pay taxes on it. If you only buy crypto with FIAT and transfer it between wallets, you also don’t have to report it or pay taxes.
However, if you dispose of (sell) any of it, you’ll need to calculate the gain/loss on that trade and report it to the IRS.
What happens if you don’t report cryptocurrency on taxes?
If you don’t appropriately report all of your crypto gains and income, you’ll probably receive a letter from the IRS and face penalties, interest, or possibly even criminal charges.
Can the IRS track Bitcoin?
Yes, the IRS can track bitcoin, cryptocurrencies, wallets, and much more due to working with advanced tools and companies such as Chainalysis that allow them to investigate misreported or unreported crypto.
Which crypto exchanges do not report to the IRS?
If an exchange serves US customers and is summoned by the IRS, it will have to comply and report data on users.
There’s no point in trying to avoid crypto tax reporting as it will be easier to comply and pay the appropriate taxes than to get caught and face severe consequences.
Will I get a 1099 from Coinbase?
Yes, Coinbase has been sending Form 1099 to many of its customers since a few years ago. All the US-based crypto exchanges are required to file a Form 1099 for their customers effective from 2023.
Regardless, it is your responsibility to file crypto taxes even if your exchange doesn’t send you a Form 1099.
Do you need a 1099-B for crypto?
With the newly approved infrastructure bill in the US, crypto brokers (e.g., crypto exchanges) will be required to issue 1099-B forms for all of their US customers, starting in 2023.
How do I avoid crypto taxes?
You probably cannot completely avoid crypto taxes, but you can minimize your crypto taxes by:
- Doing crypto tax-loss harvesting
- Selling crypto after holding it for 12 months, getting a long-term capital gains tax rate
- Donating crypto to a charitable organization to get a tax deduction
- Moving to a crypto-tax-free state of country
- Using a self-directed IRS to invest in crypto
- Getting a crypto loan and use it to invest or pay expenses.
Discover more ways to reduce your crypto taxes.
The best crypto tax software: CoinTracking
The best crypto tax software in the market is CoinTracking.
You can import your trades using CSV or API, track your gains/losses, and generate tax reports according to your preferred accounting method.
CoinTracking is your full crypto tax solution for:
- Importing (API & CSV) your trades from 110+ exchanges.
- DeFi and NFT support with our ETH+DEX importer.
- Importing your Binance Chain, Binance Smart Chain, and MATIC transactions.
- 25+ advanced reports, including which coins offer you a tax-free rate.
- Automatic capital Gains, according to 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB), accepted worldwide.
- Generating complete Tax Reports in your country.
Moreover, CoinTracking can easily classify all your earnings from yield farming, liquidity pools, crypto staking, and much more.
Crypto taxes with no errors: CoinTracking Full Service in the US.
CoinTracking also offers a Full Service for US traders. A crypto reconciliation tax expert from Polygon Advisory Group, a leading US crypto tax firm, will review your CoinTracking account, help fix any errors, and ensure you submit your crypto tax reports error-free.
Do you have any crypto tax questions? Check the best guides:
- Do you pay taxes on crypto margin trading?
- How are rebase token protocols taxed?
- Do you pay taxes on fan tokens?
- What happens if you don’t file your crypto taxes?
- Do you pay taxes when trading stablecoins?
- How is Yield Farming Taxed?
- DeFi Taxes: The Complete Guide.
- How to save taxes with a Bitcoin IRA.
- Do you pay taxes for receiving Bitcoin tips?
- Uniswap Taxes Guide
- Is wrapping crypto taxable?
- How to calculate taxes with Bitcoin dollar-cost averaging?
- Do you pay tax on stolen, hacked, or lost crypto?
- FIFO for crypto taxes? Implications of accounting methods.
- NFT Taxes: The Complete Guide.
- Is Bitcoin taxable? The ultimate guide for 2021 taxes.
- Top crypto tax friendly countries.
- How to reduce your crypto taxes?
- Crypto tax loss harvesting: Here’s what you need to know
This post is part of the Crypto Taxes AMA series. Follow our weekly AMAs on Twitter where our expert CPA, Sharon Yip answers your crypto tax questions. You can download 35+ AMA crypto tax reports for free.
Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.