Tax time is coming up quick! And believe it or not, cryptocurrencies are considered property by the IRS. This is a property just like your investments, just like stocks, bonds, mutual funds, and just like your home. With those, if you sell them throughout the year, you are required to report any capital gain or capital loss (we’ve talked about those in previous posts) – the same thing holds true to cryptocurrencies. Also, with the rising popularity of things like Bitcoin, Ethereum, and Dogecoin, the IRS is set to really crack down on any unreported gains in cryptos this coming tax year. So, what this means is for anybody holding cryptos – if you made any sort of trade (sale) in any of those currencies throughout the year, you are required to report any gains or losses on your taxes.
With investments like mutual funds, stocks, or bonds, tax reporting is not really a big deal because wherever you’re holding those funds, whether it’s a custodian or a broker, they will automatically send you tax form 1099. That form summarizes what your capital gains and capital losses were throughout the year for each holding so that you can go to a spot and really easily find what you need to pull to report on your taxes.
The brokers/exchanges that hold cryptocurrencies are not required to send you any sort of tax document summarizing any trades until 2023! (That’s going to be a form 1099-B when that comes out) So for the next couple of years, you’re on your own! This means that if you sold any cryptos throughout the year, you better make sure you go back through your transaction history and figure out what those gains and what those losses were and make sure that they get reported on your taxes. Otherwise, you might be in for quite a headache come tax time! As with anything else, if you have a complex tax situation with crypto, make sure you find a tax professional to help you out. And if you need any other guidance navigating what’s going on with those positions, y’all can always reach out to us here as well and we will offer you some guidance and direction. Y’all have a good one and stay warm!