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Cryptocurrency & the IRS: What You Need to Know
The IRS treats cryptocurrency as property, meaning every transaction—including buying, selling, trading, or earning crypto—is a taxable event. Failing to report these transactions can lead to audits and penalties.
Steps to Properly Report Crypto Taxes
- Track Every Transaction: Keep detailed records of purchases, trades, and earnings, including timestamps and values.
- Calculate Gains & Losses: If you sell crypto at a higher price than you bought it, you have a taxable gain. Losses can also be reported to offset your tax liability.
- Use the Right Forms: The IRS requires reporting crypto transactions on Form 8949 and Schedule D for capital gains. If you earn crypto as income, report it on Schedule C.
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Avoiding IRS Penalties
To stay compliant, always report your crypto transactions, even if you only held assets without selling. Using tax software designed for crypto or consulting a tax professional can ensure you file correctly and avoid costly mistakes.
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