How to Fill out Form 8949 for Cryptocurrency
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US taxpayers use Form 8949 to report cryptocurrency sales, trades, and purchases to the IRS. Keeping organized records across exchanges and wallets is crucial in order to comply with IRS rules and avoid penalties.
US taxpayers must also file Schedule D to summarize total capital gains and losses from crypto. This form pulls together the details from Form 8949 to give the IRS a clear picture of your crypto activity.
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IRS Form 8949 explained
US taxpayers use IRS Form 8949 to report every taxable event related to cryptocurrency and NFT activity, like sales, trades, and purchases.
Each transaction requires details such as the dates you bought and sold the crypto, how much you sold it for, and what you originally paid. The IRS uses this information to determine how much tax you owe or how much loss you can claim.
Learn more about how the IRS treats NFTs in our NFT tax guide.
Schedule D for crypto tax reporting explained
Schedule D works alongside Form 8949 to sum up all your capital gains and losses for the tax year. While Form 8949 lists out individual transactions, Schedule D gives the IRS the summary total of those gains and losses. This helps the IRS see your overall picture for tax purposes.
Schedule D shows whether your gains are short-term (crypto held for less than a year) or long-term (held for more than a year). Long-term gains typically get a lower tax rate, so reporting these correctly is essential.
In short, both Form 8949 and Schedule D are needed to ensure your cryptocurrency taxes are reported accurately.
Tax forms you'll need to report crypto
When it comes to reporting crypto, there are a few forms you’ll need:
Form 8949: This is used to report the details of each crypto sale, trade, or purchase.
Schedule D: This form summarizes all the year's capital gains and losses.
Schedule 1 (1040): If you’ve received crypto income through staking, airdrops, or other activities, you’ll use this form to report that income.
These forms work together to give the IRS a complete picture of your crypto activity. Our platform at TokenTax automatically generates these forms based on your transaction history, making tax reporting faster and easier.
Who needs to fill out Form 8949 for cryptocurrency?
If you’ve sold, traded, or otherwise disposed of cryptocurrency, you must fill out Form 8949. This applies whether you’ve made a profit or incurred a loss. All transactions (including smaller transactions and using crypto to buy something) must be reported.
The IRS considers crypto-to-crypto trades to be taxable. So if you trade Bitcoin for Ethereum, for example, you need to report that trade on Form 8949. However, if you hold crypto in a self-directed IRA, you might not need to report those transactions. Check with a tax professional to be sure.
Learn more about the current tax rates for cryptocurrency.
Understanding form 1090 for crypto
Form 1090 is an integral document for reporting certain types of financial transactions that may not directly relate to typical cryptocurrency trading but could apply to some investors. For instance, if a crypto asset is considered part of a larger estate or is subject to special trust arrangements, Form 1090 provides the necessary framework to ensure these are reported correctly to the IRS.
Understanding when and how to use Form 1090 can save significant time and prevent potential legal issues with the IRS, especially when managing larger or more complex estates, including crypto assets.
Integrating the details from Form 1090 with your Form 8949 submissions can be critical for cryptocurrency investors. This form ensures that any special transactions, often overlooked, are documented during your tax filing. When in doubt, consult a crypto tax professional to determine if your crypto investments require the additional reporting that Form 1090 demands. This step offers a clearer financial picture to the IRS and helps ensure compliance with the broader scope of tax regulations affecting your investments.
Do I need both Schedule D and Form 8949?
Yes, both forms are required if you’ve had cryptocurrency transactions. Form 8949 details every individual transaction, while Schedule D adds everything up and provides the IRS with a total. This is important to calculate your overall gains and losses for the year. Skipping one of these forms can result in incomplete tax reporting, which could lead to penalties.
Filling out Form 8949: step by step
Take these steps to complete Form 8949:
Step 1: Collect personal and transaction data
Gather all your cryptocurrency disposal records for the year. This includes every sale, trade, or purchase you made. You’ll also need to include dates, the amount of crypto sold or traded, proceeds, and the cost basis (what you originally paid for the crypto).
Step 2: Calculate your gains and losses
Once you have your transaction data, calculate the gains or losses for each event. Form 8949 separates short-term and long-term transactions. Short-term means you held the asset for less than a year, while long-term is anything held for over a year. Using crypto tax software like TokenTax can simplify this process.
Step 3: Complete Form 8949
Fill in the required details for each transaction. You’ll need to check one of three boxes based on whether the transaction was reported to the IRS on a 1099-B. Most crypto exchanges don’t issue 1099-Bs, so you’ll likely check the box for transactions that weren’t reported. Be sure to select the right boxes for both short- and long-term transactions.
Who must file Schedule D Form 1040?
US taxpayers with crypto gains or losses during a given tax year must file Schedule D along with Form 1040. Schedule D summarizes the transactions from Form 8949 and shows the total capital gains and losses.
Short- and long-term transactions must be included, and failing to report them could result in penalties. If you’re unsure whether you need to file, it’s always best to consult a tax professional. TokenTax can help generate both forms automatically, so you don’t have to worry about missing anything.
International taxpayers can refer to our helpful country guides for further guidance.
Where to find Form 8949 and Schedule D
You can learn more and download the latest versions of Form 8949 and Schedule D from the IRS website and through these links:
Common mistakes to avoid when filling out Form 8949 for cryptocurrency
Not reporting every transaction: Even small crypto trades or purchases must be reported. Failing to include all transactions could result in penalties.
Ignoring crypto-to-crypto trades: Trades between different cryptocurrencies are taxable and must be reported on Form 8949.
Miscalculating gains and losses: Calculation errors can lead to incorrect tax filings. Our platform at TokenTax ensures your profits and losses are calculated correctly.
Learn more about common crypto tax mistakes.
How TokenTax can help with your Form 8949 for cryptocurrency
TokenTax helps to simplify the process of reporting crypto taxes by automatically importing your transaction data from exchanges and wallets. When in doubt, speak with one of our crypto tax professionals for guidance.
Schedule a FREE crypto tax consultation
Form 8949 for cryptocurrency FAQs
What is the deadline for filing Form 8949?
Can I use tax software to complete Form 8949?
How do I handle cryptocurrency losses on Form 8949?
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