Cryptocurrency Taxes FAQ | KuCoin (2024)

FAQs

Do I have to answer IRS crypto question? ›

Everyone who files Forms 1040, 1040-SR, 1040-NR, 1041, 1065, 1120, 1120 and 1120S must check one box answering either "Yes" or "No" to the digital asset question. The question must be answered by all taxpayers, not just by those who engaged in a transaction involving digital assets in 2023.

It's best to assume the IRS has complete transparency into your crypto activity. Crypto exchanges, including Crypto.com, are legally obligated to share customer data. If you've undergone a know-your-client process with exchanges like Binance.US or Coinbase, the IRS can track and associate your crypto activity with you.

What if I get audited? The IRS has started auditing taxpayers specifically to evaluate their crypto trades. This is nothing to worry about and you are expected to disclose any addresses or wallets you own or control and any exchange accounts you have.

US taxpayers must report every crypto capital gain or loss and crypto earned as income, regardless of the amount, on their taxes. Whether it's a substantial gain or a single dollar in crypto, if you experienced a taxable event during the tax year, it's your responsibility to include it in your tax return.

Crypto-specific activity that might trigger an audit includes: Failure to accurately report crypto transactions and income. Large transactions or significant gains. Inconsistencies or discrepancies.

You can send any of your crypto between your personal wallets without paying any taxes; Even if you don't sell any of your crypto, you'd still need to answer the crypto question on Form 1040, including reporting your crypto income in your income tax return.

In certain situations, Coinbase does report to the IRS. However, this does not absolve individual taxpayers from their responsibility to report their own transactions. Coinbase's reports to the IRS can include forms 1099-MISC for US traders earning over $600 from crypto rewards or staking in a given tax year.

Even if you don't receive 1099s from crypto exchanges, brokers or other companies who paid you for crypto activities, you will need to report this income on your tax return.

How does the government know when you sell crypto? Governments can track cryptocurrency transactions through the blockchain, which records all transactions. By analyzing the blockchain, governments can trace transactions back to specific wallet addresses and identify individuals involved in crypto transactions.

There's no need to pay taxes on cryptocurrency unless you've disposed of it (ex. sold or traded it away) or earned crypto income (ex. staking & mining rewards).

What is the new tax law for crypto? ›

The rule introduces a new tax reporting form called Form 1099-DA, meant to help taxpayers determine if they owe taxes, and would help crypto users avoid having to make complicated calculations to determine their gains, according to the Treasury Department.

There is no way to legally avoid taxes when cashing out cryptocurrency. However, strategies like tax-loss harvesting can help you reduce your tax bill legally. Converting crypto to fiat currency is subject to capital gains tax. However, simply moving cryptocurrency from one wallet to another is considered non-taxable.

Major exchanges that operate within the United States are required by law to collect this information due to Know Your Customer (KYC) regulations. The IRS can and has requested these records from exchanges.

Yes, everyone must answer the digital asset question – even if the answer is no. The IRS makes clear that unlike in previous years, for tax year 2022, everyone who files Form 1040, Form 1040-SR, or Form 1040-NR must check one box, answering either "Yes" or "No" to the digital asset question.

Yes. In the United States, your transactions on Crypto.com and other platforms are subject to income and capital gains tax. If you've earned or disposed of crypto (ex. Sold or traded away cryptocurrency) during the year, you'll have a tax liability to report to the IRS.