IRS crypto tax deadline 2024

Regulators are still catching up to the rapidly changing crypto sector. The IRS is continuing offering ad hoc advise on crypto tax concerns, even though there are still a lot of unanswered questions. It is also your responsibility to stay current with this guidance in order to make sure that you are accurately calculating, filing, and paying your taxes annually.
Ready or not, tax filing season for 2024 has here. The IRS is taking and processing 2023 tax returns as of January 29. The organization anticipates filing over 128 million forms prior to the formal tax deadline of April 15, 2024.
You might wish to familiarize yourself with certain recent regulation changes that may have an impact on you as you compile your financial records, select your tax software of choice, and get ready to file. These include adjustments to business deductions, enlarged income tax brackets, and larger standard deduction amounts.

How the IRS tracks your crypto taxes

The IRS is able to follow your cryptocurrency transactions even though they are "pseudo-anonymous."
Recall that all transactions on public blockchains, such as Ethereum and Bitcoin, are available to the public. This implies that connecting "anonymous" transactions to recognized investors is the only step in combating tax fraud. For this precise reason, the IRS has already collaborated with vendors such as Chainalysis.
The IRS will soon be able to follow cryptocurrency with even more information at its disposal. All US-based exchanges will have to submit Form 1099 reports to the IRS detailing capital gains and losses beginning with the 2026 tax year.

How to file your crypto taxes

Cryptocurrency is liable to capital gains and ordinary income taxes in the US. The cryptocurrency exchange or broker you use must, upon IRS request, submit specified paperwork and provide you with a copy in order to report certain types of activity directly to the IRS. Any taxable activity on these forms must also be reported by you, the taxpayer, to the IRS on your tax return.

You should do the following 5 actions to file your taxes on cryptocurrencies:

·         Compute your gains and losses in cryptocurrency.

·         Submit IRS Form 8949.

·         Put your 8949 totals on Form Schedule D.

·         Add any cryptocurrency income.

·         Finish the remaining tax return.

Below, we'll go over these 5 processes in more depth!
Crypto tax software like CoinLedger can be helpful if you're searching for a quick and simple approach to streamline the tax filing process! Simply link your exchanges and wallets, and the site will create comprehensive tax paperwork in a matter of minutes.

Step 1: Compute your gains and losses in cryptocurrency

You incur a crypto taxable event and experience a capital gain or loss each time you sell, trade, exchange, or otherwise dispose of digital currency.
Gains and losses on your cryptocurrency investments could have a big impact on your tax obligation in the current or next tax year.
The difference between the asset's value at the time of disposal and its cost basis must be found in order to calculate the amount of the capital gain or loss. The price at which an asset was purchased, including any exchange or transaction costs, is its cost basis.

Step 2: Submit IRS Form 8949

The tax form used to declare capital gains and losses on cryptocurrencies is IRS Form 8949.
Every cryptocurrency sale that took place during the tax year needs to be reported using Form 8949. When filing your taxes, you must record any additional (non-crypto) investments you made throughout the tax year on separate Forms 8949.

Step 3: Put your 8949 totals on Form Schedule D

Your total capital gains and losses are reported on Form 1040 Schedule D, which also includes Form 8949. Since your short- and long-term capital gains and losses are subject to different crypto tax rates, enter the totals for each separately on this form.

Step 4: Add any other crypto income on Form 1040

Your cryptocurrency holdings may have brought you additional revenue in addition to your capital gains and losses. Examples include mining, air-dropping, staking, purchasing cryptocurrency as payment, and even winning coins or tokens from play-to-earn games.
In these circumstances, you must report the cryptocurrency as income as opposed to a gain or loss on capital. Depending on the applicable income tax band, it will be taxed as ordinary income.

Depending on how you received the money, you'll also need to record the remaining portion of your cryptocurrency income using one of three additional forms: Schedule 1, Schedule B, or Schedule C. For instance, you would report assets received via an airdrop on Schedule 1, but if you were paid in cryptocurrency for rendering a service, you would report it on Schedule C.

What happens if you fail to include cryptocurrency in your tax return?

Based on how active you've been as a trader, reporting cryptocurrency activities on your tax return may take a while. It could be tempting to ignore it or decide not to file a report because of this. Experts caution that this might be a costly error that could come back to haunt you.
The IRS enforces in two ways: first, if your tax return is just wrong and you fail to disclose all of your activity, you may be subject to a 20% inaccuracy penalty, along with interest, according to Donnelly.

However, it is considered tax evasion if you fail to file and the IRS finds out—knowing that you failed to declare it—he claims. "For every year you fail to file, there's a potential fine of up to $250,000 and a maximum sentence of five years in prison.