Understand the tax implications of cryptocurrency transactions

Cryptocurrency, NFTs and the metaverse are likely going to be unavoidable as tax professionals navigate each tax season. Now’s the time to learn how the IRS treats digital assets, including the requirements for reporting income received from selling, trading and exchanging them for other products and services.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.   

Q: Do wash sale rules apply to digital asset transactions?
A: The current guidance is no; the wash sale rules do not apply. However, there is pending legislation that expands wash sale treatment to include digital asset transactions.

Q: If you buy a cup of coffee with virtual currency, would this be considered a taxable transaction?
A: You could have a taxable transaction depending on the basis in the virtual currency. You are exchanging property for coffee and would pay taxes on the gain for the virtual currency sold to buy the coffee.

Q: Is there a report that will show if the taxpayer received a fork or an airdrop?
A: The client would have to look at their wallet to determine if an airdrop or hard fork was received by the taxpayer.

Q: Is Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, filed at receipt of cash or with the tax return?
A: File Form 8300 by the 15th day after the date the cash was received. If that date falls on a Saturday, Sunday or legal holiday, file the form on the next business day. It is separate from the tax return. 

To learn more about the tax implications of digital assets and cryptocurrency, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.