What the IRS Really Expects on Crypto This Filing Season
- Crypto is taxable property—trading, spending, or receiving it can trigger tax. [irs.gov]
- The IRS asks a digital‑asset question on the 1040—answer it accurately. [irs.gov]
- Third‑party reporting is expanding (more 1099‑style forms from platforms). Keep your own records to avoid mismatches.
- If your business accepts crypto, large payments can require Form 8300 (crypto is treated like cash for this purpose).
[tax.thomso…euters.com]
1) Crypto = Property (Not Cash). Why That Matters.
For federal taxes, digital assets—including cryptocurrencies, many stablecoins, and some NFTs—are treated as property, not currency. That means you calculate gain/loss on each disposition (sell, swap, or spend) and you must keep basis and holding‑period records. [irs.gov]
Quick example:
- You bought 0.2 BTC for $5,000.
- You later use that BTC to buy equipment worth $8,000.
- That purchase is a taxable sale with a $3,000 gain ($8,000 value − $5,000 basis). [irs.gov]
Takeaway: Spending crypto is a sale for tax purposes—even if no dollars change hands. [irs.gov]
2) Income vs. Capital Gains (Don’t Mix These Up)
Ordinary income (taxed when received):
- Mining or staking rewards
- Airdrops/forks when you have dominion and control
- Wages/contractor pay in crypto
These amounts are taxed at fair market value on receipt and become your cost basis for later sales. [irs.gov]
Capital gains/losses (taxed when disposed):
- Selling for USD
- Swapping one coin for another
- Spending crypto on goods/services
Short‑term (≤ 1 year) vs. long‑term (> 1 year) rates apply based on holding period. [irs.gov]
Example: You received staking rewards worth $2,000 (ordinary income now). Later you sell them for $2,500 (capital gain $500). Two steps, two tax treatments. [irs.gov]
3) The 1040 Digital‑Asset Question (Answer It Right)
Form 1040 asks whether, at any time during the year, you received, sold, exchanged, or otherwise disposed of a digital asset (or a financial interest in one).
- Answer “Yes” if you sold, swapped, spent, or received crypto (rewards, airdrops, compensation).
- Answer “No” only if you held crypto but had no transactions.
This question is signed under penalty of perjury. [irs.gov]
We help business owners simplify operations — and avoid costly mistakes.
4) How the IRS Sees Crypto (It’s Not “Invisible” Anymore)
What this means for you: Your return should match what third parties report—or you’ll risk an IRS notice. Keep your own detailed records because early platform reporting may not see your historical basis or wallet‑to‑wallet transfers.
5) Accepting Crypto as a Business? Don’t Miss Form 8300.
Thanks to the Infrastructure Investment and Jobs Act (IIJA), certain crypto payments are treated like cash for large‑payment reporting. If your trade or business receives $10,000 or more in digital assets in one transaction (or related transactions), you must file Form 8300 and collect payer identity details. Build this into your payment workflows. [accountants.sva.com]
Quick checklist:
- Update payment policies/engagement letters to address Form 8300 when paid in crypto. [tax.thomso…euters.com]
- Train staff to identify related transactions that should be aggregated. [tax.thomso…euters.com]
- Capture payer name, address, TIN, occupation at payment time (retroactive collection is hard). [tax.thomso…euters.com]
6) Recordkeeping: Where Filers Get Burned (and How to Avoid It)
The #1 problem we see is missing basis. If you jump between exchanges or self‑custody wallets, a platform may not know your original purchase price. In the worst case, the IRS could assume zero basis—treating the entire sale as gain. Keep lot‑level records and label internal transfers so they don’t look like sales. [irs.gov]
Two common pitfalls:
- Wallet‑hopping basis gap: Bought 1 ETH for $2,200 on Exchange A → moved to wallet → moved to Exchange B → sold for $2,350. Without your records, Exchange B might imply a $2,350 gain instead of the true $150. [irs.gov]
- Everyday spending: Paying a $40 bill with crypto bought for $25 creates a $15 capital gain. Track lots before spending. [irs.gov]
7) Quick Myths vs. Reality
8) What To Do This Week (Before Filing or Extending)
- Answer the 1040 question accurately. If you received, sold, swapped, or spent crypto, that’s a Yes. [irs.gov]
- Gather CSVs from all exchanges and wallets; reconcile to any 1099‑style statements.
- Document internal transfers (transaction hashes, dates, amounts) to prove non‑sales.
- If you accept crypto in your business, confirm whether Form 8300 applies.
