fbpx
Cryptocurrency Reporting

Crypto Currency Reporting for 2021 tax season!

Crypto Currency Reporting for 2021 tax season! 1116 872 Bernstein Financial Services

There is a lot of confusion out there about what needs to be reported on your 2021 tax return if you have purchased or sold Cryptocurrency.  Cryptocurrency is looked at by the IRS like a stock.

There are two levels of reporting:

  • If you purchased or sold Cryptocurrency during 2021, check the box YES on our tax organizer under Miscellaneous Questions regarding Virtual Currency. This will signal us to check the box on the front page of your tax return indicating the same.
  • If you sold Cryptocurrency, there will be reporting of the gain or loss on the sale. The tricky part is WHAT IS A SALE OF CRYPTO?

A purchase of a product using crypto is treated as a sale of the crypto, then a purchase of the product using the cash from the crypto sale.  I realize that it does not seem like it happened this way, but this is how the IRS looks at it.  Now, imagine if you buy 10 or 15 products per month in a crypto currency account each month. That is 10 or 15 sales per month.  This usually causes a very complicated set of facts to convert into stock sales and purchase (gain/loss) information.

Also, if you trade one crypto for another, you have sold one crypto then purchased another.  This is also complicated to convert to sales and purchases for tax purposes.

Either your brokerage will provide a 1099B with sales and purchase summaries, or you will need to contract with a software company like CryptoTraderTax to convert your transactions to tax return friendly documents.