How to Report Crypto on Taxes for Personal and Business

Reading Time: 3 minutes

In order to report crypto on your taxes, you’ll need to understand a few key details about how it works. In this article, we’ll walk through how cryptocurrency is categorized by the IRS, how to calculate it into your taxes, and what forms you will need. Because regulations are constantly evolving, it’s best to work with an accountant with cryptocurrency expertise. 

How do I know whether to report crypto on taxes as personal or business?

Trading crypto personally is frequently called hobby trading, crypto hobby, or cryptocurrency as a personal hobby. People who engage with crypto on a personal hobby typically trade through Coinbase, Kraken, Gemini, Bisq, and Binance, and others. Crypto can now be traded through some traditional brokerages, including Robinhood and E-Trade, with more expected to follow. Even if you are trading or mining as a hobby, there are tax benefits to setting up a crypto business.

If you are running a crypto business, that typically means you are:

  • Business trading cryptocurrency or virtual assets
  • Mining cryptocurrency as a business
  • A software company assisting with blockchain support services
  • A business involved in cryptographic ledger
  • A business distributed ledger or public ledger
  • Any business involving smart contracts, blockchain, and all other aspects of cryptocurrency and virtual assets.

It’s best to speak with a qualified cryptocurrency accountant to ensure you are filing appropriately.

How is cryptocurrency categorized?

Because it is used for exchange of goods, most people assume cryptocurrency is classified as income, in the same way that US dollars are, but that’s incorrect. Cryptocurrency is categorized as a personal asset.

Personal assets include things like savings accounts, retirement accounts (like an IRA or 401k), certificates of deposit, money market accounts, treasury bills, and stocks. It can also mean property, land, a house or structure, vehicles and boats, furnishings, computers, and jewelry.

Since cryptocurrency is considered a personal asset, how is it taxed?

Like your other personal assets, cryptocurrency is subject to capital gains tax. 

Calculating your capital gains tax can be complicated, so we recommend starting by checking out our article, How to Calculate Capital Gains Tax in the US or Canada, but because calculating capital gains on cryptocurrency gets complicated and depends on your circumstances, we really recommend chatting with a cryptocurrency accountant.

How do I file forms that disclose my cryptocurrency gains to the IRS?

There are three forms that can cover your cryptocurrency (virtual asset) reporting when you prepare your Taxes and get them ready for the IRS. 

  • Form 8949
  • Schedule D
  • Form 1099-B

Form 8949, which reports sales and exchanges of capital assets. On this form, you’ll report gains from sales or exchanges of your Bitcoin (or other altcoins).

You will also need a Schedule D and Form 1099-B, which brokerages provide to taxpayers. Schedule D is where you’ll report gain or loss transactions. 

Filing Cryptocurrency Taxes as a Business

If you run a cryptocurrency business as a DBA, Sole Proprietor, LLC, Partnership, S-Corporation (S-Corp) or C-Corporation (Inc), in addition to the above forms, you may also need:

  • 1040 Schedule 1 or 1040 Schedule C
  • 1065 for Partnership Returns
  • 1120S S-Corporation Tax Return
  • 1120 C-Corporation Tax Return

Depending on whether you use crypto as a business and whether you have a business entity set up for a mining business, you may need to file a 1040 Schedule 1 or 1040 Schedule C. The 1040 Schedule 1 is where you’ll add deductions and exclusions, while the 1040 Schedule C is used for sole proprietors operating a business. There can be big tax benefits to setting up a business entity for your crypto business. Other business entity types must report their assets 

It does get complicated, but don’t worry, our experts are happy to talk you through it!

How do I ensure I am filing properly and paying correct fees?

The best way to ensure you are paying your full tax liability, keeping as much of your income from crypto as possible, and not facing unknown fines and penalties is to work with an accountant that specializes in crypto. Because the IRS continues to change regulations, forms, rates, and requirements to keep up with this rapidly-evolving form of currency, it’s important to read directly from the IRS what is required. Taxes are always complicated, and adding crypto to the mix can elevate this complication if you have multiple forms you have to report and add that to Rental properties and Schedule C and E to cause even more confusion on what to report where. Working with an expert will give you not only peace of mind, but a trusted source of guidance for crypto tax strategy moving forward.

Have questions? Let us know! Email us at info@akifcpa.com

Cryptocurrency is also known as Bitcoin, virtual assets, Litecoin, Dogecoin, Ethereum, Monero, Ripple, Steam, IOTA, NEO, and others. Purchasing and Trading of cryptocurrency can occur at exchanges such as Coinbase, Kraken, Gemini, Bisq, Binance and others. 

Have questions? Fill out the contact us form below or email us at info@akifcpa.com

Request to Speak with a Cryptocurrency Accountant
Facebook
Twitter
LinkedIn
Sign Up For Our Weekly Newsletter
*Email
AKIF CPA
5.0
Based on 107 reviews
powered by Google
Annie Phillips
Annie Phillips
12:35 10 Oct 21
Turn around time was amazing on the project I needed done. When you don’t understand all the different forms... communication is key and you will get that here. They are there to explain what and why you need it.read more
Meru Kapadia
Meru Kapadia
23:33 01 Oct 21
I usually don't write reviews much as everyone has different experiences, but definitely wanted to share the positive... experience I have had here and why I would recommend them to all my family, friends and co-workers.I got a referral for here from a friend, so thought of giving them a try over my old CPA firm. I have been going here for a couple years now and have to say they are top notch. They are always responsive and willing to work with me even when I am delayed. I generally like to ask a lot of questions and not once did I feel like they were annoyed by it and would very thoroughly and positively answer all my concerns with detail explanations. Even during the pandemic, they worked with me 100% virtual and it was seamless. Overall, I am very happy with this firm and will continue with them for the foreseeable future.read more
Kevan Shah
Kevan Shah
21:45 01 Oct 21
I’ve been going to them for 3 years now for multiple of my businesses. I changed to them after I had problems with my... previous CPA firm and I’m so glad I did! Best decision I ever made for my businesses. They have saved me thousands of dollars over the years as well as deal with my immensely complicated tax filling issues. No matter when I call, they always help answer all my questions (and trust me I have a lot) and put my mind at ease on all my concerns. I feel as if I am family the way they take care of me. The quality of their work has not changed; very consistent and professional. It is an understatement when I say I highly recommend them.read more
Maunil Shah
Maunil Shah
16:19 01 Oct 21
AKIF CPA is the best place for your tax needs! Saim has been easily available for my all my questions and concerns. ... Couldn’t ask for a better firm that provides excellent service and a familiarity with their clients. I always recommend family and friends to AKIF CPA!!read more
Shah Hussain
Shah Hussain
03:58 01 Oct 21
Hello AKIF CPA,I wanted to share my experience with you, your team and whomever may be reading this message. My most... humble thanks to you and your team for a being such great part of my success.You have done a fabulous job for us this year, and since you took over our books (during our most devastating times) you have literally taken weight off of our shoulders.Thanks for bringing everything up to date and also providing us with numbers or as you call it consultations, ahead of time so we could seal the holes.Great work!!!Shah H.read more
Sumit Dalwadi
Sumit Dalwadi
04:57 30 Sep 21
The professionals at Akif have been absolutely amazing! Quick to answer all the questions I had and always available... to offer their guidance.read more
Calvin R
Calvin R
20:21 29 Sep 21
I recommend these guys! I will be going back next year. They made everything simple and we understood what was... happening. There we issues with our taxes due to our previous accountant and these guys fixed everything. They answered our questions and service was always with a smile.read more
Ammoria Daniels
Ammoria Daniels
02:11 16 Sep 21
We contacted Akif with an urgent matter regarding corporate taxes. Akif immediately understood what was needed and... within days had everything ready to sign. The level of service we received was amazing and unmatched. Waqar expertise in trucking industry made our situation seamless. His communication was outstanding; I heard from him daily and could have been completed sooner if I was as fast as he was 😃 Highly recommended!read more
Joe Paneitz
Joe Paneitz
18:30 18 Aug 21
What an absolute pleasure to work with this CPA firm. My business is already seeing such a positive impact and growth.... I cannot believe I didn't connect with them sooner. This firm is helping in so many ways! 5 stars is an understatement! Thank you so much for your help AKIF CPAread more
Helptest ARCpoint Labs
Helptest ARCpoint Labs
15:02 18 Aug 21
The firm is quick, responsive, and has the latest technological software. Thus far, I have been with them for 3+ years... and will continue to work with them even after relocating. They make it easy even when I'm miles away. Would highly recommend them.read more
Luz Tipaz
Luz Tipaz
16:06 13 Jul 21
Saim and his team are the best CPAs in town. I have been their client for years. All started when I needed help with... company structure with multiple companies and then accounting and Taxes. I have been very happy ever since. Thank you AKIF CPA.read more
Maria perez
Maria perez
18:31 08 Jun 21
Me and my husband have been getting all of our personal Taxes, business Taxes, monthly bookkeeping, accounting and... payroll done with AKIF CPA. Recently, we had more stuff come up and had detailed analysis done on capital gains, single family rentals (SFR) and business disposition. You will only know how great this CPA company is until you have worked with them and given them a chance. Words can’t describe our experience. AKIF CPA gets the job done every time - very reliable, professional and affordable.read more
Afnaan Amin
Afnaan Amin
22:14 02 Jun 21
Very good experience, we had unique situation in regards to cross border income as Canadians currently residing in the... US. Income on both sides of the border through completely different channels. Everything was very easy and completed timely, I also had lots of random questions and Mohammad provided top notch service along the way and even after we finished our taxes!! Highly recommended.read more
Ryan Paton
Ryan Paton
10:56 08 May 21
I moved to the USA from Canada late 2018 as part of a promotion/relocation for work. For my 2019 returns, I used an... accounting firm recommended by the local Canadian social club in my city, which was a terrible experience. They were slow to respond to inquiries and would follow up in piecemeal requests which dragged out my return process over several months, often asking for information I had already provided.For the price I paid, I vowed to find better service. I found Mohammad online and decided to reach out. Mohammad was extremely responsive, took care of my US and Canadian returns as well as my wife's business returns in a timely manner. Overall, it was a very positive experience and I would recommend him to another in my situation.read more
Tuan Vo
Tuan Vo
01:59 20 Apr 21
I relocated to Texas from Alberta, Canada and needed a CPA to help me with my cross-border taxes as I was not happy... with the CPA that I used previously. During my interviewing process to find another CPA, I had good feedback from Mohammad as he was able to answer my questions regarding my unique tax situation with expertise, and importantly to me, in a timely manner. I decided to use his services for the current tax year and I have nothing but compliments for the work Mohammad provided. If you are in need of a professional cross-border CPA, I highly recommend reaching out to Mohammad Akif.read more
See All Reviews
js_loader
Archives

Crypto Tax & Accounting Newsletter Signup

*Email

Cross-Border Tax Newsletter Signup

*Email