Records of any asset purchases and sales, including cryptocurrency, are important for reporting on federal income tax returns. The IRS treats cryptocurrency as property for tax purposes, which means that any gains or losses from buying, selling, or trading cryptocurrency must be reported on your tax return.
When you purchase cryptocurrency, you will need to record the date of purchase, the cost of the cryptocurrency, and the fair market value of the cryptocurrency at the time of purchase. When you sell or trade cryptocurrency, you will need to record the date of the sale or trade, the fair market value of the cryptocurrency at the time of the sale or trade, and any gain or loss from the sale or trade.
It's important to keep accurate records of all cryptocurrency transactions, as the IRS may request to see these records as part of a tax audit. This includes keeping records of the cost of purchase, fair market value, and any fees associated with the transaction.
It's also important to note that when you trade one type of cryptocurrency for another, it is considered a taxable event and you will need to report the fair market value of the cryptocurrency received in exchange for the one you disposed of.
You will have to report the gains or losses from the sale of virtual currency on Form 8949, Sales and Other Dispositions of Capital Assets. And you will have to report the transactions on your tax return, depending on the nature of your transactions you may have to file a Schedule D or Form 4797.
Records of any asset purchases and sales, including cryptocurrency, are important for reporting on federal income tax returns. The IRS treats cryptocurrency as property for tax purposes, which means that any gains or losses from buying, selling, or trading cryptocurrency must be reported on your tax return. When you purchase or sell cryptocurrency, you will need to record the date of purchase or sale, the cost of the cryptocurrency, and the fair market value of the cryptocurrency at the time of purchase or sale. It's important to keep accurate records of all cryptocurrency transactions, as the IRS may request to see these records as part of a tax audit. You will have to report the gains or losses from the sale of virtual currency on Form 8949, Sales and Other Dispositions of Capital Assets, and you will have to report the transactions on your tax return, depending on the nature of your transactions you may have to file a Schedule D or Form 4797.