How will your crypto transactions be taxed? What forms should I complete?

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Concealing taxable activities, including crypto trading, can lead to problems with the Internal Revenue Service, experts warn. In fact, the IRS has already made it clear that it is monitoring.

Form 1040, which US taxpayers use to file their annual tax return, has a question about “virtual currency” on the first page.

“The tricky thing is that there are a lot of really crazy things with crypto that you can do, from anything DeFi to NFT. This will be the hardest part of taxing 2021,” says Pat White, co-founder and CEO of Bitwave, a company that helps companies file their crypto taxes, according to Time magazine. “If all you do is buy Bitcoin, hold it, and sell it six months later, then any CPA can help you with that,” White says. How do I file a claim for crypto taxes?

Cryptocurrency may be subject to capital gains when traded or sold for a profit, per CNBC. This includes exchanging digital coins, cashing out US dollars, or making a purchase.

Be sure to tick yes on the 1040 form about the virtual currency question. For your individual tax return, you will need to complete Form 8949 to report your cryptocurrency and NFT gains and losses, according to Forbes. If you’ve held on to your virtual currency for more than a year, you may be eligible for long-term capital gains of 0%, 15%, or 20%, depending on your income. For this, you will use Form 1099-B. If you have more than 200 transactions and $20,000 in gross proceeds, you must complete Form 1099-K, which will show your monthly activity. According to US News, if you have been involved in crypto mining, you must complete a Form 1040 Schedule C to report profits or losses.

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