At Ustaxxpert, we’ve taken the initiative to research cryptocurrency taxation in depth and provide clients with clear, reliable guidance. Cryptocurrency (or “crypto”) is a digital currency that uses cryptography to secure transactions. These currencies operate on decentralized networks like blockchain and can act as a substitute for traditional money. Bitcoin, for example, is a well-known convertible virtual currency—it can be traded digitally between users or exchanged for real currency.

The IRS recognizes that virtual currencies may be used to pay for goods or services or held as investments—both of which can create tax liabilities. If you mine cryptocurrency, receive it as payment, or earn it in exchange for services, it is treated as taxable income at fair market value on the day it was received. Later, if you sell or spend that same cryptocurrency at a profit, you must also pay capital gains taxes, either short-term (for assets held less than a year) or long-term (for assets held longer).

Short-term gains are taxed at your regular income rate, while long-term gains may be taxed at lower rates, in some cases as little as 0% with proper tax planning. Factors such as filing status, income level, and holding period play a major role in determining tax liability. The IRS treats cryptocurrency as “property,” similar to stocks or gold, which means gains and losses must be reported. Simply buying and holding crypto does not trigger taxes—but using, trading, or selling it usually does.

Until recently, exchanges reported crypto activity inconsistently, leaving many taxpayers unaware of their reporting obligations. To improve compliance, the IRS introduced Form 1099-DA, specifically for digital assets, with mandatory reporting starting in the 2023 tax year. In addition, the IRS has begun sending letters (6173, 6174, 6174-A) to crypto investors, reminding them of potential unreported income. If you’ve received one of these letters, it’s crucial to review and, if necessary, amend prior returns to remain compliant.

Why Choose Ustaxxpert for Crypto Taxes?

Our expert team of IRS-Enrolled Agents and cryptocurrency tax specialists can:

• Explain crypto taxation clearly and in plain language

• Track, reconcile, and report transactions from multiple wallets and exchanges

• Provide strategies for reducing your tax liability

• Respond to IRS letters, audits, and investigations

• Represent you before the IRS to resolve disputes

• Prepare detailed reports, including:

  • Capital Gains Report (with transaction basis, proceeds, and gains)

  • Revenue Report (for mined cryptocurrency values)

  • Donation Report (cost of gifts and tips)

  • Margin Report (gross profit from margin trading)

  • Final Comprehensive Report (summarizing profits and cost basis)

IRS Tax Forms for Cryptocurrency

When filing, the IRS now directly asks whether you engaged in virtual currency transactions. If yes, keep accurate records and complete the correct forms:

• Form 8949 – Reports each crypto transaction (purchases, sales, gains, losses)

• Schedule D – Summarizes total capital gains and losses from all investments

• Schedule C – Reports crypto mining income as a business or hobby

• Schedule 1 – Reports hobby mining income, though deductions may be limited

At Ustaxxpert, our mission is to ensure your cryptocurrency activity is properly reported, compliant with IRS requirements, and optimized for the lowest possible tax liability. Whether you’re a miner, investor, or trader, we’ll guide you through every step with expertise and confidence.