Cryptocurrency Tax Forms

Cryptocurrency taxes and accounting are very complex. In fact, over 95% of the cryptocurrency portfolios and tax returns we review have errors, incorrect tax interpretations or missed opportunities. To worsen this issue, most CPAs do not even have a proper understanding of cryptocurrency transactions needed to adequately interpret tax code sections realted to your portfolio.

Below we’ll go over the most common tax forms that investors receive along with related accounting and tax considerations for each form.

1099-MISC

You will receive a 1099-MISC for your cryptocurrency activity if you earned staking income or other types of income in amounts that exceed $600. This will be reported as ordinary income on Schedule 1 of your personal tax return.

When accounting for this, be sure you consider the income in your calculations and cost basis but do not double count this crypto income when reporting it for tax purposes. This requires proper reconciliation of your 1099-MISC and cryptocurrency accounting records.

1099-B

Exchanges may issue you a Form 1099-B. This summarizes your annual capital gains and losses. This will be reported as ordinary capital gains on Form 8949 and Schedule D of your personal tax return.

It is common to receive inaccurate 1099-B forms. This is because the exchanges reporting this information will not have cost basis data related to assets that you transferred onto their exchange rather than purchasing on the exchange.

When accounting for this, be sure to reconcile the correct cost basis data realted to assets acquired on other exchanges and wallets associated with the sale transactions. This requires proper cryptocurrency accounting and accurate reconciliations of your 1099-B and cryptocurrency accounting records.

1099-K

Exchanges may issue you a Form 1099-K. This form is filed when you have more than 200 transactions and over $20,000 in gross proceeds. This summarizes your proceeds.

Form 1099-k will only show your cryptocurrency proceeds but will not include any cost basis information.

When accounting for this, be sure to reconcile the correct cost basis data realted to assets sold associated with the proceeds reported. This requires proper cryptocurrency accounting and accurate reconciliations of your 1099-K and cryptocurrency accounting records.

1099-DA

The 1099-DA is a new form for which the IRS has not officially released drafts. According to Bloomberg, IRS CI Deputy Chief James Robnett confirmed this summer at the annual New York University School of Professional Studies Tax Controversy Forum that the IRS is working on the form—to be called Form 1099-DA (Digital Asset).

The form will be used to report taxpayer cryptocurrency activity and will include the information you’d that is reported on Form 1099-B, such as the number and kind of assets, cost basis, fair market value, and holding period.

We are closely monitoring updates related to this that will impact future tax reporting and cryptocurrency accounting considerations. Under the tax law, Form 1099-DA begins in tax year 2023, which means Form 1099-DA will be available to taxpayers in 2024.

 

Record Keeping

Record keeping is key when it comes to cryptocurrency accounting and tax reporting. Without proper transaction records and documentation, you will not be able to accurately reconcile and report your transactions. Lack of cost basis information can lead to overpaying in taxes since you will not be able to substantiate your basis in assets for which you have not retained proper documentation.

All cryptocurrency exchanges will allow you to download a transaction history report that details every transaction that took place on the exchange. Download this transaction history on a monthly or quarterly basis to ensure you retain proper records. Additionally, keep a list of all wallet addresses and blockchains that you use throughout the year.

Wrapping Up

Cryptocurrency taxes and accounting are very complex. No one wants to overpay Uncle Sam at the cost of your business or family’s finances. It’s important to plan in advance with an experienced crypto CPA when it comes to managing your cryptocurrency taxes and accounting.

About Camuso CPA

Camuso CPA saves you money, time and peace of mind.

We save digital asset investors and digital businesses thousands and cumulatively millions with effective tax planning strategies, accurate accounting and proactive advice.

At Camuso CPA, all our clients are digital asset investors and digital business owners. We’ve developed cryptocurrency specific expertise that allows us to provide tailored solutions to our clients in ways most other firm simply can’t.

Camuso CPA was one of the first CPA firms in the industry to provide their clients cryptocurrency accounting services and tax advisory. Camuso CPA was also the first CPA firms to accept cryptocurrency as a form of payment for professional services.

Learn more about us here.

Next Up

• Schedule a time to speak with our team in detail about your taxes and accounting.
• Read our Definitive Guide for Cryptocurrency Taxation to learn about cryptocurrency taxes from an experienced CPA.
• Read our Cryptocurrency Tax Planning Guide to learn about saving cryptocurrency taxes from an experienced CPA.