Crypto Currency and the IRS- What you need to know!

 



If you are a TRADER in the CRYPTO MARKET or are making plans to be, then you must understand how DIFFICULT it can be to REPORT these trades accurately and timely on your tax return.

Crypto currency is commonly referred to as DIGITAL ASSETS and until just recently, the trading of these assets has gone pretty much unregulated.

Except for the large brokerage firms, REPORTING the amount you PAID to buy crypto (COST) and the amount you SOLD the crypto (PROCEEDS) for has been left up to the trader to figure out on their own. Since the trading of these assets must be reported on the tax return, this information is necessary to be able to correctly report the GAINS OR LOSSES from these trades (like stock/bond trading).

As a tax preparer, I have received a variety of information from clients who typically use a CRYPTO TRADING PLATFORM which mostly provides some type of a disorganized spreadsheet of random transactions that don’t clearly define or match up the COSTS and PROCEEDS for each completed trade. To make these trades recognizable and possible to report on the tax return, it can take several hours of time to clearly identify the COSTS and the PROCEEDS for each trade.

Due to these disorganized and confusing spreadsheets of transactions that are given out to taxpayers, the IRS has now gotten involved and has PROPOSED REGULATIONS on reporting these SALES or EXCHANGES of DIGITAL ASSETS (CRYPTO) by brokers to STOP the CONFUSION and provide clear information for taxpayers and tax professionals to be able to report these trades correctly and accurately.

According to a recent IRS NEWS RELEASE, starting January 1, 2025, BROKERS, TRADING PLATFORMS, DIGITAL ASSET PAYMENT PROCESSORS, and CERTAIN DIGITAL ASSET HOSTED WALLET providers will be required to report all GROSS PROCEEDS received through the trading of DIGITAL ASSETS to the IRS on a new form 1099-DA.

Beginning January 1, 2026, brokers will also be required to include the COST and PROCEEDS information on these forms for their clients to use to help them to report these trades to the IRS on their tax returns.

Hopefully, as we get closer to these proposed dates, we will start to see the trades of DIGITAL ASSETS becoming easier to identify and report from the brokerage statements for income tax purposes.

If you want to stay organized and up to date on the latest IRS information and how it impacts you and your taxes, visit our website and sign up to Join Our Community.   

www.Dorseytaxplace.com

972-672-8850

Bonnie Dorsey

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