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Crypto Tax FAQs

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Are you not sure of how to pay your crypto taxes? Do you wish to lower your crypto tax bill or find out which transactions are taxable? Read along to have a clear idea about crypto tax. Also, you need to know how to make free money from Bitcoin.

Do I have to file cryptocurrency taxes?

  • Yes you have to file crypto tax returns.
  • It was true even before the IRS started to ask regarding crypto with a question of yes or no.
  • But it does not mean that you will owe any crypto tax.
  • If you hold, you will not owe any crypto tax but the IRS will still wish to know.
  • It will never hurt to ensure that the agency has the correct information about all holdings.
  • If you fail to report a capital gain or your income from crypto it may cause tax debt, interest, fines, and criminal prosecution in some extreme cases.

When crypto is considered a taxable income?

  • Crypto is considered to be a taxable income if you receive it through mining, in some airdrop, or as some payment for services or goods.
  • POS rewards are considered as income.
  • You must find the fair market value of all coins when you receive them and count the total amount towards the gross income.
  • If after that you sell, spend or exchange all coins, the transactions become taxable depending upon the capital loss or gain.
  • At receipt time, the fair market value, that is the same amount you have reported as income will be the cost basis for future transactions. 

How to report crypto on a tax return?

  • To report crypto on tax return, at first you must check yes to the question:
  1. Do you get, sell, exchange, send or acquire a financial interest in virtual currency any time in the year?
  2. If yes then complete IRS Form 8949 to create a crypto tax report.
  3. It is used for tracking the cost basis for every virtual coin along with the sale price which is the USD value you have received from selling it. 

Do I have to report to the IRS any cryptocurrency loss?

  • Yes you have to report your cryptocurrency losses to the IRS.
  • If you do so then it could save you some money for two reasons.
  1. Your exchange may send information regarding your transactions to the IRS.
  2. However such information is incomplete often and does not include any loss.
  3. It can make the IRS think that you owe more than you do actually.
  4. If you correct that mistake it will be highly costly and more challenging than properly reporting to start with.
  5. Capital gains are offset by capital losses and it will reduce the tax owed.
  6. They can be used for offsetting regular income or other capital gains and can get carried forward for offsetting future gains.

Is moving cryptocurrency from an exchange or crypto wallet to another taxable?

  • No moving cryptocurrency between exchanges or wallets that you own is never taxable.
  • If the virtual currency will remain in your possession, it is not a transaction and only a transaction. 

I have never reported cryptocurrency taxes previously? What do I need to do?

  • Previously if you have not reported your cryptocurrency taxes and wish to avoid a crypto audit or anything worse you must call any tax attorney who has a proper understanding of virtual currency.
  • Take professional help and rebuild your cryptocurrency trading history to stay out of trouble with the IRS.
  • File amended crypto tax returns.

How to report cryptocurrency mining on taxes?

  • The coins awarded for cryptocurrency mining count as your income.
  • It must be reported as such.
  • Mining is considered as a business in which case your income needs to get reported on your tax return on Schedule C.
  • You need to include the value of the fair market of mined coins when you receive them. 


For the IRS crypto tax enforcement has turned out to be the main compliance priority. The tax rules constantly evolve but the past few years have proved that the IRS aggressively seeks enforcement. The IRS issued one revenue ruling on crypto treatment in 2019. Despite it, many questions are unanswered regarding how cryptocurrency income or reporting gets treated mainly if it involves overseas or international crypto. But the last year’s 1040 tax returns have a direct question related to virtual currency on the tax return’s first page. It will give a clear idea of how crypto has become a main enforcement priority for the government of the US.