Guide to IRS Form 8949 for Crypto Taxes
Form 8949 can be daunting when reporting crypto income on your taxes. We take you through the process step by step.
Table of Contents
The Form 8949 is the tax form used for cryptocurrency capital gains and losses.
Each sale of crypto during the tax year is reported on the 8949. If you had other non-crypto investments, they need to be reported on separate Forms 8949 when you file your taxes.
Below, we go through filling out Form 8949 step-by-step:
First, you need to fill in the initial information at the top of the Form 8949. For the short term trades section, you will need to select check box A, B, or C in Part I:
- (a) Short-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS
- (b) Short-term transactions reported on Form(s) 1099-B showing basis wasn’t reported to the IRS
- (c) Short-term transactions not reported to you on Form 1099-B
You will most likely select check box C, as crypto exchanges typically do not provide Form 1099-Bs. However, if an exchange has provided you a 1099-B, you will want to check A or B.
You will then need to organize your calculations row-by row, including the details of each transaction:
- Description of property: This describes the asset that was sold, exchanged, or spent. For example: 1.5 BTC
- Date acquired (MM/DD/YYYY): This is the day you purchased the crypto asset that you are using as your cost basis for the transaction.
- Date sold or disposed of (MM/DD/YYYY): This is the day you sold, exchanged, or spent the crypto asset.
- Proceeds: Your proceeds are the gross USD value of crypto sold, exchanged, or spent.
- Cost basis: Your cost basis is the gross USD value at which you acquired the crypto being sold, exchanged, or spent. This includes purchases in fiat currency or another crypto.
- Adjustment, if any, to gain or loss: This code describes the adjustment amount you enter in column G. Typically, you will not have any adjustments, but the IRS lists capital gain adjustments in their instructions if you need them. For example, you may need to make adjustments if you received a Form 1099 without cost basis and need to report your purchase prices to the IRS.
- Adjustment, if any, to gain or loss: This amount corresponds to the description code you entered in column F. Typically, you will not have any adjustments.
- Gain or (loss). Subtract column (e) from column (d) and combine the result with column (g) - This is your net capital gain or loss in USD for this particular transaction.
The below example shows a completed Form 8949 of short term sales of ETH, ZEN and ELF.
Next, you need to include your Totals in the aggregate boxes at the bottom of the form.
- Total Proceeds: the sum of your transaction sales prices.
- Total Cost or other basis: the sum of your transaction acquisition prices.
- Total Adjustment, if any, to gain or loss: Typically, you will not have any adjustments. If you do have adjustments, the total would be reported here without any accompanying description.
- Total Gain or (loss): the sum of your transaction capital gains or losses.
If you were trading large volumes of crypto, your cost basis and proceeds totals may seem larger than you expect. This is normal, as they are the sum of all cost basis / proceeds. For example, you could trade $10,000 of BTC back and forth multiple times with little gain or loss and still have a large amount of total cost basis / proceeds.
Afterwards, you will repeat the same steps to populate the information for your long-term trades in Part II of Form 8949.
Many traders find it easier to use crypto tax software to fill out Form 8949, rather than completing it by hand. This is because software can automatically export your transactions in whatever format you need. This way you can automatically create an export of your information into a template for upload into TurboTax or auto-fill a Form 8949 PDF and attach it to your tax return.