Bitcoin Boomers Beware: IRS Hunts Crypto Fortunes

What investors need to know about crypto taxes amid the latest bitcoin rally

The Internal Revenue Service (IRS) is ramping up its monitoring of cryptocurrency transactions, and tax professionals are expecting increased scrutiny of digital assets.

Investors should be aware of the tax implications of trading or selling cryptocurrencies.

When you file your tax return, you’ll be asked a “digital assets” question.

Answer “yes” if you’ve sold, traded, or received crypto as payment.

Remember that “digital assets” include cryptocurrencies, stablecoins, and nonfungible tokens.

If you have crypto profits or income but answer “no” to the digital assets question, the IRS could accuse you of intentionally violating the law.

Cryptocurrency trading is taxed similarly to stock trading.

The gain is calculated as the difference between your purchase price and the value when you sell or exchange the asset.

For investments held over a year, you qualify for long-term capital gains rates (0%, 15%, or 20%), while short-term capital gains or regular income taxes apply to assets held for one year or less.

Reporting crypto transactions can be challenging.

Forms 1099-MISC, 1099-B, or no forms may be issued, depending on the exchange.

Keep detailed records of your transactions.

The IRS has proposed a standardized Form 1099-DA for digital asset reporting that will take effect in 2025.

In summary, the IRS is stepping up its oversight of cryptocurrency, and investors should be aware of the tax implications.

If you have crypto transactions, consult with a tax professional and keep accurate records.