Crypto Tax Season: 5 Must-Know Tips And 3 Smart Moves For Next Year

Forbes

26-03-2025

Bitcoin resting on a calculator beside IRS Form 1040, symbolizing cryptocurrency trading and ... More individual income tax obligations. Concept: it's time to pay taxes on crypto transactions.
Tax season is in full swing, and if you've touched crypto—whether through buying, selling, staking, or trading NFTs—you need to know: the IRS is watching.
In recent years, the Internal Revenue Service (IRS) has increased its scrutiny of digital asset activity. It classifies cryptocurrencies and other digital assets, including non-fungible tokens (NFTs), as property—not currency—for tax purposes. This distinction carries significant implications: property is subject to capital gains taxation when sold or exchanged, unlike traditional currencies. So even though 'currency' is in the name, crypto is treated more like stocks or real estate than dollars or euros in the eyes of the IRS.
For anyone who owns or transacts in digital assets, proper tax reporting is no longer optional. Let's break down the five key things you must do before the filing deadline of April 15, 2025, and explore three proactive steps you can take now to make tax time next year significantly easier.
If you are a bookkeeper, CPA, or enrolled agent preparing returns or advising clients who touch crypto in any capacity, you must get up to speed—immediately. Digital assets are no longer a fringe topic; they are increasingly mainstream financial instruments with complex and unique tax implications.
Failure to ask the right questions, understand the mechanics of digital asset transactions, or properly classify and report these events can expose your client to penalties, audits, and unnecessary scrutiny. More importantly, it may expose you to professional liability.
Some exchanges issue Forms 1099-B, 1099-K, or newer iterations like 1099-DA, while others do not issue tax forms at all. Inconsistent reporting standards mean that relying solely on client-provided tax documents from platforms like Coinbase, Binance, or Kraken may lead to major gaps in reporting. In 2026, mandatory broker reporting requirements will further complicate the landscape; but they won't necessarily simplify it.
That's why using crypto transaction tracking tools—especially those that integrate directly with professional tax preparation software like UltraTax, Drake, or Lacerte—is more than a convenience. It's a necessity. Tools like CoinTracker, Koinly, and TaxBit can aggregate wallet and exchange activity, classify transactions, and generate compliant tax reports that reduce the burden on your practice and improve audit resilience.
If you haven't yet built crypto fluency into your tax prep workflow, now is the time. A new generation of clients is already there, and they are counting on you to be ready.
Right near the top of your individual tax return (Form 1040), the IRS now includes a critical question:
'At any time during the tax year, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?'
This question is not rhetorical. You are required to answer it, and accuracy is essential.
You must check 'Yes' if you:
If, however, you only purchased and held digital assets without using, trading, or selling them, you may check 'No.' But when in doubt, consult a tax professional who understands the nuances of digital assets.
Taxable events involving digital assets are not limited to profitable trades. The IRS clearly states:
'If you have digital asset transactions, you must report them whether or not they result in a taxable gain or loss.'
Key taxable events include:
Capital gains or losses should be reported using Form 8949 and Schedule D, while income from crypto-related activities may appear on Schedule 1 (for supplemental income) or Schedule C (if you're self-employed).
Importantly, even receiving a digital asset without selling it (as in the case of airdrops or staking rewards) can generate a tax liability because it is treated as ordinary income upon receipt.
Non-fungible tokens, or NFTs, represent unique digital assets often associated with art, music, or digital media. IRS guidance (Notice 2023-27) clarifies that certain NFTs may qualify as "collectibles" under the tax code.
This matters because gains from the sale of collectibles are subject to a maximum 28% capital gains tax rate, which is higher than the typical long-term capital gains rate for other assets.
So, whether you're flipping a profile picture NFT or holding a tokenized piece of digital art, you must report any gain or loss. And if the underlying asset is considered a collectible, the tax rate may be higher.
If 2024 was a difficult year in the markets for you, you may be able to reduce your tax bill through tax-loss harvesting. This strategy involves realizing losses to offset realized gains.
You can:
This applies to:
The IRS also issued guidance in 2023 that may support claims of loss for worthless or abandoned assets, though you should speak with a tax advisor about how best to apply these rules.
One of the most overlooked aspects of crypto taxation is recordkeeping. You, as the taxpayer, are responsible for tracking the following:
This information is required to calculate your gains or losses and to determine your tax liability.
'Keep records. Calculate your capital gain or loss. Determine your basis. Report on the correct form.' IRS Digital Assets FAQ
To make this easier, consider using digital tools such as CoinTracker, Koinly, or TaxBit to aggregate and reconcile your transactions across wallets, exchanges, NFTs, and decentralized finance (DeFi) platforms.
Many tax preparation headaches can be avoided by syncing your wallets and exchanges with crypto tax software early and often.
Most tax platforms allow you to:
Choose software that supports:
The goal is to eliminate year-end surprises and automate data entry to the greatest extent possible.
Your method for calculating capital gains can significantly impact your tax liability. The IRS allows several options:
For tax year 2025, Revenue Procedure 2024-28 clarifies how to assign basis across wallets and exchanges. Planning with your CPA or tax advisor can help you make the most of this flexibility.
Beginning with the 2025 tax year, crypto "brokers" will be required to file Form 1099-DA or similar tax documents with the IRS. These reports will include:
Although this requirement is not mandatory for the 2024 tax year, some platforms have already begun issuing 1099 forms voluntarily. Going forward, discrepancies between your self-reported transactions and third-party reports may trigger IRS inquiries.
If you receive a 1099 form, make sure it matches your own records. If you don't receive one, you are still obligated to report your gains, losses, and income.
Final Thoughts
Crypto is no longer a niche corner of the financial system, and regulators have taken notice. The IRS has expanded its enforcement capabilities, hired experts, and built tools to monitor digital asset activity.
If you're a:
then, you are subject to tax rules that are growing in complexity and scope.
Your best defense? Education, preparation, and (well informed!) professional guidance. All tax advisers are NOT created equally, so choose wisely.
Start by keeping detailed records, staying updated on regulatory developments, and consulting tax professionals who understand the evolving crypto landscape.
Visit the IRS Digital Asset Resource Page for the latest publications and FAQs. And remember: what you don't know can hurt you—but what you do now can save you next April.