Reporting Crypto to the IRS or not?

Reporting Crypto to the IRS or not?

Published on October 12, 2022

Your IRS form 1040 requests that you report your cryptocurrency, but should you? Certain situations require that you report it, but others do not. We will walk you through those situations below.

You must report crypto on your return if:

  • You paid for goods or services in crypto,
  • You received crypto for your services,
  • You sold crypto to exchange it for U.S. currency,
  • You exchanged or traded crypto for other crypto,
  • You obtained more crypto through staking activities or hard fork, or
  • You disposed of crypto in any other way.

A good rule of thumb to remember is if you gained any additional currency or gave any away, it must be reported on your income tax return. The way it is reported on the return depends on a number of factors.

You do not need to report crypto on your return if:

  • You received crypto as a gift,
  • You moved your crypto from one virtual wallet to another,
  • You purchased crypto with U.S. currency (you must, however, let IRS know that you have crypto in your possession by answering Yes on page 1 of Form 1040).

Have you already submitted your report and made a mistake? You do not need to do anything if you reported something unnecessarily. Extra reporting will be overlooked. If you answered “no” to the cryptocurrency question when you should have reported your crypto, you will need to file an amended return or a superseding return if the file date has not yet passed. If you do not, you will receive a letter advising to file that amended return and pay taxes if you do not follow through.

If you need help with cryptocurrency or your income tax return, you can complete our New Customer Intake Form for a free consultation.

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