Honor system is over: Make sure you report crypto on your taxes

Shanna Goldin said maybe she’d dabble in cryptocurrency if she knew more about it.

“A lot of people are and a lot of people make money on it, but I think you really need to be educated and you really need to have a legitimate person who knows the trade and understands it,” she told Action 9 investigator Jason Stoogenke.

For those who do dive in, you’re supposed to be reporting it on your taxes each year. It’s been based on the honor system so far.

But now, the IRS has a more formal reporting system for crypto. It’s called a 1099-DA (for Digital Assets). This is the reporting system’s first year..

Make sure you keep track now and file it at the beginning of next year.

“There’s no new taxation rules on any of this. There are these new reporting requirements that will help people become a little bit more honest,” Jackson Hewitt Senior Vice President and Chief Tax Officer Mark Steber said. “If you had a dollar of gain, you’re supposed to put that on your tax return.”

Steber said — for now — the IRS just wants to know basic information about how much you make with virtual currency. But, down the road, it’ll want to know more specifics, like you already have to do on a 1099-B form for stocks and other securities.

“Most people say this to me, ‘Well, I didn’t cash out.’ Well, that really has no impact whatsoever,” he said. “So a lot of mistakes are being made just because a lot of crypto investors don’t recognize the fact that you don’t need cash to have a transaction. You need a transaction to have a transaction. And if you had a gain and you’re happy, odds are you had a taxable gain.”

Don’t like any of this?

Well, Steber says cryptocurrency platforms don’t either. They’ve been pushing back.

They say it’s a lot of work to capture all the data accurately. There’s even a fight over what a platform is, whether it qualifies for these new tax rules.

But, he says, there’s no doubt it’s a moneymaker and the government wants its share.

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