The 2021 Tax Reporting Challenges of #Crypto
Cryptocurrencies continue to become more widely accepted as payment for goods and services, and remain as the bedrock of #nft transactions. This means that your likelihood of winding up with reportable crypto activity is growing fast. Exchanges like Coinbase make it easy for the average investor to dabble in crypto, and quickly buy and sell a variety of cryptocurrencies. What you may not know is that your crypto activity may be creating taxable events.
According to the IRS rules, taxable events are created each time you cash out, spend, or exchange one cryptocurrency with another. All of this activity (regardless of gains or losses) must be reported on your 2021 tax return.
What can you do to make sure you don’t accidentally underreport activity, and create a tax liability that the IRS may come to collect down the road (including penalties and interest)?
Some crypto exchanges will issue you a 1099-B or 1099-K depending on your amount of activity. These forms consolidate your activity and make tax reporting much easier. Unfortunately, for 2021 there are a large number of widley-used exchanges that will not provide these tax forms for you (including the fan-favorite Coinbase). Instead, the burden is on you to download your historical transactions and figure out your taxable gains and losses. Typically the data comes in the form of a .csv or other raw data format.
Now is the time to take a look into your crypto activity for 2021 and download all the activity needed to calculate your taxes – especially if you have not already received a 1099!
Our tax team has significant expertise working with clients in consolidating crypto activity and calculating accurate reporting to include on their return. Please contact us if you need assistance.