How to Fill Out Form 8949 for Cryptocurrency
TokenTax content follows strict guidelines for editorial accuracy and integrity. We do not accept money from third party sites, so we can give you the most unbiased and accurate information possible.
Form 8949 is the primary tax form used to report cryptocurrency sales, trades, and purchases in the US. Utilizing crypto tax software like TokenTax can help streamline this process and minimize the risk of errors.
When filling out Form 8949 for crypto, it's essential to gather all your transaction data, including gains, losses, and transaction details, regardless of the number of wallets and exchanges you've used during the tax year. Comprehensive record-keeping is crucial for accurate reporting.
What tax form should I use to report cryptocurrency and NFTs?
In the US, tax reporting of cryptocurrency and NFTs requires specific forms. Form 8949 is used to report cryptocurrency disposals such as sales, trades, and purchases. For cryptocurrency income, individual taxpayers typically use Schedule 1. The form you’ll use will depend on the nature of your crypto income.
Who needs to fill out Form 8949 for cryptocurrency?
Filling out Form 8949 is necessary for US taxpayers in various crypto-related situations, including when you have:
Profited from cryptocurrency or NFT sales or trades.
Incurred losses from cryptocurrency or NFT transactions.
Used cryptocurrency for purchases.
Note that self-directed crypto IRAs enjoy exemptions from Form 8949 reporting.
Getting started with Form 8949
Before we delve into the step-by-step instructions, gather all your cryptocurrency transaction data, including gains, losses, and transaction details. Comprehensive record-keeping is vital, irrespective of the number of wallets and exchanges you’ve used during a given tax year.
Filling out Form 8949: step by step
Here are step by step instructions to help you fill out Form 8949 for crypto. It’s helpful to have all your data for the tax year in question gathered from every exchange, platform, and wallet you’ve used.
Step 1: Gathering personal information
To begin work on Form 8949, consolidate all your cryptocurrency and NFT disposals for the tax year. Keep complete documentation of each disposal, whether it involves a sale, trade, or purchase. Organize your usernames and passwords for various platforms and exchanges, and be prepared to download your transactions for the tax year in question.
Step 2: Compiling transaction details
To complete Form 8949 for crypto, you'll need specific transaction information that includes property descriptions, acquisition and disposal dates, proceeds, cost basis, and corresponding gains or losses. Crypto platforms will typically allow you to download a complete record of your transactions for a given time period as a spreadsheet.
Step 3: Calculating gains and losses
Form 8949 distinguishes between short-term and long-term disposals. Short-term transactions involve assets held for less than 12 months, while long-term transactions span over a year, often benefiting from more favorable tax rates. Calculating crypto gains and losses can be time-consuming, and crypto tax software like ours can help.
Step 4: Completing parts I and II
Within both the short- and long-term sections of Form 8949, you'll need to select one of three checkboxes based on whether your transactions are reported on Form 1099-B and if the basis was reported to the IRS. Here are the options:
Short-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS.
Short-term transactions reported on Form(s) 1099-B showing basis wasn't reported to the IRS.
Short-term transactions not reported to you on Form 1099-B.
Typically, you'll opt for box C, as most cryptocurrency exchanges do not issue Form 1099-B to customers. However, if you've received Form 1099-B from an exchange, you'll need to select either box A or B.
For part II, you’ll see similar options for long-term transactions.
Note the various columns required for each transaction, from description of property to gain or loss. Accurate records are essential, as is understanding cost basis. Our time-saving crypto tax software at TokenTax uses your trade history and completes crypto tax form 8949 for you, including versions that are compatible with TurboTax and TaxAct.
TokenTax automatically generates the tax forms and reports you need.
Common mistakes to avoid when filling out Form 8949 for cryptocurrency
When filling out Form 8949 for cryptocurrency, it's vital to avoid common crypto tax mistakes that can lead to underreporting, penalties, or inaccuracies in your tax filings.
One critical error to avoid is neglecting to report every crypto transaction, including trades, sales, and minor purchases. To ensure comprehensive reporting, consider using crypto tax software like TokenTax, which allows you to easily import data from various sources.
Another common misstep is to ignore crypto-to-crypto trades. These are taxable events and should be evaluated for capital gains or losses based on their fair market value at the time of the transaction. Maintaining detailed records of these trades is essential for accurate reporting when filling out Form 8949 for cryptocurrency.
Do I have to fill out Form 8949 if I didn’t receive a 1099 form?
Whether or not you receive a 1099 form from a crypto platform you've used, if you have relevant crypto transactions, you still must complete a crypto tax Form 8949 for the year.
What should I do if I have too many transactions on Form 8949?
Some tax platforms limit the number of transactions you can report. Consider using crypto tax software like ours at TokenTax to consolidate your gains and provide a report to the IRS.
How TokenTax can help with your Form 8949 for cryptocurrency
TokenTax simplifies Form 8949 for crypto by reporting by enabling you to import cryptocurrency transaction data from effectively every crypto platform, exchange, and wallet, reducing the time and effort required for tax season.
How to add my cryptocurrency Form 8949 to TokenTax
TokenTax generates crypto tax Form 8949 for you using your trade history. You can sync your crypto transactions via API or upload them in a supported CSV format, and TokenTax will automatically complete the forms you need to file your taxes, saving you time and effort.
If you need additional support for complicated transactions, consider TokenTax VIP and work with a dedicated team of crypto tax professionals.
Schedule a FREE crypto tax consultation
Form 8949 for cryptocurrency FAQs
Here are answers to frequently asked questions about crypto tax Form 8949, Form 8949 for crypto, and how to fill out Form 8949 for cryptocurrency.
What is the deadline for filing Form 8949?
The deadline to file Form 8949 corresponds with the general tax filing deadline, which is typically April 15th, with possible extensions.
Can I use tax software to complete Form 8949?
Yes, crypto tax software like ours at TokenTax can streamline the process and automatically complete Form 8949 for you based on your transaction data from various crypto platforms.
How do I handle cryptocurrency losses on Form 8949?
Cryptocurrency losses can be reported on Form 8949 to potentially reduce your overall tax liability. Learn how to report crypto losses and reduce your crypto taxes, and consult a crypto tax professional for further guidance.
Do I need to file additional forms for cryptocurrency tax reporting?
In most cases, for individual US taxpayers Form 8949, along with Schedule 1 for crypto income, should suffice for crypto tax reporting. When in doubt, seek professional crypto tax guidance from our expert team at TokenTax.
Is form 8949 required for crypto?
Yes, Form 8949 is typically required for US taxpayers reporting cryptocurrency disposals, including sales, trades, and purchases. It is used to detail the gains or losses incurred from these transactions.
Do I need form 8949 from Coinbase?
If you have engaged in cryptocurrency transactions such as sales, trades, or purchases on Coinbase, you may need to use Form 8949 to report the associated gains or losses. It depends on your overall crypto activities and income.
How do I know if I need to file form 8949?
You need to file Form 8949 for cryptocurrency if you have profited or incurred losses from crypto sales, trades, or purchases during the tax year. It is essential to thoroughly assess your crypto activities to determine the requirements. When in doubt, consult a crypto tax professional for guidance.
Should I file form 8949 or Schedule D?
The decision to file Form 8949 or Schedule D for cryptocurrency reporting depends on the nature of your crypto income. Form 8949 is typically used for detailing specific transactions, while Schedule D provides an overview of overall capital gains and losses.
To stay up to date on the latest, follow TokenTax on Twitter @tokentax.