The IRS expects you to report your crypto gains, losses and income by April 15th 2022 (this has been extended to Monday the 18th of April 2022 due to the weekend). Find out which tax forms you need and how to complete them for your crypto taxes.
The IRS has made it clear that American crypto investors need to pay taxes on their crypto investments and they’re proactively chasing non-compliant taxpayers by requesting customer information from crypto exchanges and mailing warning letters to investors.
If you’ve invested or traded in crypto, you need to report your crypto income and gains accurately - but how do you report the money you made from cryptocurrency to the IRS? Many US investors want to know what is the tax form for crypto and what information does the IRS need about crypto?
For those filing via an accountant, there are just as many questions, like whether you need an accountant to report crypto tax, or even, how do you report crypto taxes through tax apps like Turbo Tax and Tax Act?
The good news? We’ve done the research to answer all your tax questions. Learn how to report your crypto to the IRS, in 5 simple steps.
How to report crypto on your IRS tax return
Wondering how to report cryptocurrency on taxes?
You need to report your crypto capital gains and losses on Schedule D and Form 8949, and you need to report your crypto income on Schedule 1 or Schedule C. US taxpayers need to attach all these forms to your Individual Income Tax Return Form 1040 by April 18th 2022.
To report your crypto tax to the IRS, follow 5 steps:
- Calculate your crypto tax. You need to know your capital gains, losses, income and expenses.
- Once you know your capital gains and losses, complete the tax form for cryptocurrency - Form 8949 - with all your taxable transactions.
- Include your net capital gains and losses from Form 8949 on Form Schedule D. This includes your short-term and long-term capital gains and losses.
- If you have crypto income from airdrops, forks, liquidity pools, bonuses and so on, you’ll need to complete Schedule 1. If you’re self-employed or operating a crypto business and have crypto income, use Schedule C instead.
- Complete Form 1040 and attach the other forms you’ve completed. File this with the IRS and you’re done!
Sounds simple - but these forms can get confusing fast. Let’s go through each form step-by-step.
Calculate your crypto taxes
Before you can report your crypto tax to the IRS, you need to calculate your crypto totals. This means you’ll need to calculate your:
If you’re using crypto tax software like Koinly - this step is simple. Just use our how to calculate your crypto taxes guide. If not, you can use our US Crypto Tax guide to learn how crypto is taxed in the US and how to calculate your crypto taxes.
Once you’ve got your figures ready, it’s time to fill out your tax return forms.
What are the IRS crypto tax forms?
There are several forms you might need for IRS crypto reporting, including:
- IRS Form 8949
- Schedule D
- Schedule 1
- Schedule C
- Form 1040 (Individual Tax Return Form)
You might not need all of these forms, it all depends on the type of crypto investments and transactions you’ve made. Your crypto capital gains and losses are reported using IRS Form 8949, Schedule D and Form 1040. Your crypto income is reported using Schedule 1, Schedule C and Form 1040.
Let's break down each form step-by-step.
IRS Form 8949 for crypto tax reporting
The IRS Form 8949 is a supplementary form for the 1040 Schedule D. This form is used to report any disposals of capital assets - in this instance, cryptocurrency.
So anytime you’ve ‘disposed’ of crypto by selling it, swapping it or spending it - you’ll include it on this form. For each disposal, you’ll need the following information:
- A description of the asset - for example, 0.5 BTC.
- The date you acquired the asset - for example, 15th May 2021.
- The date you disposed of the asset - for example, 20th August 2021.
- The sale price at fair market value - for example, $30,000.
- The cost basis of the asset at fair market value - for example, $20,000 + $50 in transaction fees.
- You shouldn’t need this column.
- You shouldn’t need this column.
- Your capital gain or loss - for example, $9,950.
As you can see, A - F correspond with the different columns on Form 8949.
An important note before you start filing the form out - it’s actually split into two parts. In the first section, you’ll fill out your short-term disposals. These are taxed at your normal Income Tax rate.
The second part is your long-term disposals. This applies to any asset you’ve held for more than a year before disposing of it. These are taxed at a much lower rate than short-term disposals. You can find out more about long and short term crypto taxes rates in our US Crypto Tax Rate 2022 Guide.
For both sections, you’ll need to fill out your total gains at the bottom of the page. You'll need calculate your:
- Total proceeds.
- Total cost basis.
- Total gain or loss.
You’ll need to do this for both sections for your short-term and long-term gains. You’ll also need to check another couple of boxes on this form which will later correspond with the Schedule D form.
For part 1 (short-term), check box A, B or C as it applies to you.
For part 2 (long-term), check box D, E or F as it applies to you.
Remember, it’s really important you include every taxable crypto transaction in this report - so don’t leave out your losses. You can actually offset up to $3,000 of capital losses against your capital gains - this benefits you by reducing your overall tax bill.
Once you’ve completed Form 8949, you can move onto the next form - Schedule D (Form 1040).
IRS Schedule D (Form 1040) for crypto tax reporting
Schedule D (Form 1040) is the form you’ll report your net capital gain or loss from all investments. This includes your crypto activity, as well as any gains or losses from businesses, estates and trusts.
Like Form 8949, Schedule D is split into three sections - for your short-term capital gains and losses and your long-term capital gains and losses and a summary.
For part 1 (short term capital gains and losses), fill out either line 1a, 1b, 2 or 3. Refer back to the box you checked in Form 8949.
Then you'll need to fill out column D, E and H:
d) Total proceeds
e) Total cost basis
h) Total gain or loss.
You’ll need to fill out the rest of part 1 as it relates to your unique investments, but line 6 (short-term capital loss carryover) is of particular importance to all investors. This is where you report any capital losses you want to carryover so if you’ve already offset up to $3,000 in capital losses against your gains or your personal income, report any further losses to carryover here.
Once you’ve done this, head to line 7 - net short-term capital gain or loss. Report your net capital gain or loss from all investments here.
For part 2 (long term capital gains and losses), fill out either line 8a, 8b, 9 or 10. Refer back to the box you checked in Form 8949.
You'll need to fill out column D, E and H:
d) Total proceeds
e) Total cost basis
h) Total gain or loss.
Like above, line 14 is where you’ll report any long-term capital loss carryover.
Once you’ve filled out this, go to line 15 to report your long-term net capital gain or loss.
Now head to Part 3 (Summary).
On line 16 - combine line 7 and line 15 and enter the result.
The instructions will vary from here depending on whether you have a net capital gain or a net capital loss.
If you have a net capital gain:
You'll also need to fill out lines 17 through 20.
If you have a net capital loss:
Skip ahead to line 21.
In either instance, you'll need to report these figures on line 7 of Form 1040 (more on how to fill this out below).
Remember, you can only offset a maximum $3,000 net capital loss against your personal income or capital gains.
How to report income from crypto to the IRS
Not all of your crypto investments will be viewed as a capital gain or loss. In some instances, your crypto investments will be seen as a kind of income - just like a salary or a bonus. You can see how different crypto investments are viewed by the IRS in our US Crypto Tax Guide.
The form you use to report your crypto income will be either:
- Schedule 1 (Form 1040)
- Schedule C (Form 1040)
You may or may not need all of these forms. It all depends on the type of crypto transactions you’ve made. We’ll look at each form in turn.
IRS Schedule 1 (Form 1040) for crypto tax reporting
If you’ve earned crypto from airdrops, forks, bonuses or crypto hobby income - you’ll generally report this on Schedule 1 (Form 1040) as ‘other income’.
You’ll find this in part 1, line 8.
IRS Schedule C (Form 1040) for crypto tax reporting
If you’re self-employed and earn income through crypto, you should use Schedule C (Form 1040) to report your crypto income. Even if you have a regular job, you might be considered self-employed if you were running a crypto mining operation or other activities at a similar scale.
If your crypto income activities do amount to that of a self-employed taxpayer, you’ll need to fill out Schedule C (Form 1040), as well as pay self-employment taxes. These taxes account for Medicare and Social Security taxes usually accounted for in employee paychecks.
You’ll report your gross income and profit in part 1 of Schedule C.
If you’re seen to be running a business, you can also deduct any expenses related to the business (like mining equipment) in line 30, part 2 of Schedule C.
How to report crypto in your Individual Income Tax Return (Form 1040)
Last, but by no means least, is Form 1040. This is your Individual Income Tax Return Form.
You’ll need to add all of the forms you’ve completed to your Form 1040.
Then on your Form 1040, you'll need to fill out the following lines as they relate to your previous forms.
On line 7 - report your net capital gain or loss from Schedule D.
On line 8 - report your other income from Schedule 1.
You'll also need to check the box - "at any time during 2021, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency'.
Fill out the rest of Form 1040 as it relates to your individual circumstances.
Once you’ve completed Form 1040, you’re done! You just need to ensure you’ve submitted these forms to the IRS before the 18th of April 2022.
The IRS has released a draft of the tax return for 2023 (2022 Form 1040) and in it there is a new 'digital assets' section.
This section contains an extended question from this year's Form 1040, "At any time during 2022, did you (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?".
This is just a draft currently, but is likely to be included in the 2023 tax return, and potentially extended to other forms.
Report crypto to the IRS with Koinly
As you can see, reporting your crypto taxes to the IRS can be time consuming. For investors with many disposals, filling out Form 8949 alone is a huge amount of work. But not with Koinly!
All you need to do is import your crypto transaction history from your various wallets, exchanges or blockchains using API or CSV files. Koinly will then calculate your capital gains, losses, income and expenses. Once it’s worked its magic, you can just head to the tax report page in your Koinly account where you’ll find a simple summary of your crypto taxes.
Not only this, but you can also download a variety of tax reports - specific to your location and tax authority. For US investors, this includes our IRS Report (Form 8949 and Schedule D) - with all your capital gains and losses calculated for you, saving you hours. Koinly can also generate the income totals you need for your Schedule 1 form via our Complete Tax Report.
For US investors using a third-party service to file their tax report Koinly can also generate specific reports for TurboTax and TaxAct reports - you just upload our report to your chosen tax app.