As we close out the year, December is the final and most important month to prepare for your upcoming tax filing. This includes completing your year-end tax strategies and finalizing all records.

This year, cryptocurrency values have risen significantly. If you realized investment gains, congratulations. However, if you have delayed or overlooked reporting your crypto activity, it is essential to prepare carefully.
The IRS is now enforcing cryptocurrency reporting more aggressively, and penalties may apply for missing or incorrect filings.

🔍 IRS Treatment of Cryptocurrency

The IRS classifies cryptocurrency as property.
This means taxes may apply even if you did not convert your crypto into cash.

Taxable events include:

• Selling cryptocurrency
• Exchanging one coin for another
• Using crypto to purchase goods or services
• Receiving crypto through staking, mining, or airdrops
• Receiving crypto as compensation

📄 Keep Complete Transaction Records (Most Important Step)

To ensure accurate reporting, please maintain:

• Transaction date and time
• Quantity
• USD value at the time of each transaction
• Cost basis
• Exchange/wallet details

Lack of records may cause the IRS to assume a cost basis of $0, resulting in inflated taxable gains.

📝 Required IRS Forms

• Form 8949 & Schedule D: Capital gains and losses
• Schedule 1 or Schedule C: Income from staking, mining, or crypto received as payment

💡 Use Losses to Reduce Taxes

If you have losses, you may:

• Offset gains from crypto or other assets
• Deduct up to $3,000 against ordinary income
• Carry forward unused losses

📢 New Regulations (2025–2026)

• Crypto exchanges will begin issuing expanded forms such as Form 1099-DA
• Starting in 2026, exchanges must also report cost basis
• Returns that do not match exchange data may trigger IRS reviews

⚠️ Common Misunderstandings That Lead to IRS Letters

• “Crypto is anonymous.” → The IRS receives data from major exchanges.
• “I didn’t cash out.” → Crypto-to-crypto trades are taxable.
• “No 1099 was issued.” → Reporting is still required.

✔️ Summary: Stay Compliant and Avoid IRS Issues

To protect yourself and ensure an accurate tax filing, please focus on:

1. Accurate recordkeeping
2. Correct reporting
3. Understanding new IRS rules

If you need assistance preparing your cryptocurrency tax records or year-end planning, please contact us.
We are here to help ensure your tax reporting is complete, accurate, and compliant.

Helpful IRS web