If you disposed of cryptocurrency during the year, you’re required to report your gains and losses on Form 8949.
Unfortunately, filling out the form can take serious time and effort — especially if you’ve used multiple wallets and exchanges during the tax year.
In this guide, we’ll share everything you need to know about Form 8949 before you get started filing your taxes. We’ll also break down step-by-step instructions on how to report your cryptocurrency disposals on your tax return.
What tax form should I use to report cryptocurrency and NFTs?
In the United States, crypto is taxed as income and capital gains. How your crypto is taxed and reported depends on the nature of your income.
Form 8949 for crypto disposals: If you dispose of crypto-assets — such as selling them, trading them away, or using them to make a purchase — you should report your disposal on Form 8949.
Schedule 1 for crypto income: If you’re an individual taxpayer who earned crypto-assets as income or rewards — such as staking and mining rewards — you should report your earnings as income, typically on Schedule 1.
For more information, check out our complete guide to reporting crypto on your taxes.
Who has to fill out Form 8949 for cryptocurrency?
You should report your cryptocurrency on Form 8949 in the following situations:
- I made a profit while selling/trading cryptocurrency/NFTs
- I made a loss while selling/trading cryptocurrency/NFTs
- I used cryptocurrency to make a purchase
One exception to these rules is if you’re buying and selling cryptocurrency in a self-directed crypto IRA. These accounts are tax-advantaged and as a result, these trades should not be reported on Form 8949.
How to fill out Form 8949 in 6 steps
Here’s a 6-step process on how to report your cryptocurrency and NFT disposals on Form 8949.
Step 1. Take into account all of your disposal events
The first step to filling out your Form 8949 is to take account of every one of your cryptocurrency and NFT disposals during the tax year.
Remember, each one of your disposals across your wallets and exchanges need to be reported on Form 8949. Examples of disposals include selling your cryptocurrency or NFTs, trading your crypto assets away, or using cryptocurrency to purchase goods or services.
Step 2. Collect information on your cryptocurrency disposals
To report your cryptocurrency and NFT disposals on Form 8949, you’ll need the following information:
- A description of the property you sold (ex. 1.5 BTC)
- The date you originally acquired the property
- The date you sold or disposed of the property
- Proceeds from your crypto disposal
- Your cost basis for purchasing the property
- Your gain or loss
If you haven’t kept accurate records of your proceeds and cost basis for your crypto transactions, you may have trouble filling out Form 8949. If this is the case, you may want to consider using crypto tax software to generate a comprehensive tax report automatically.
Step 3. Divide your transactions into short-term and long-term disposals
Form 8949 is divided into two sections: short-term and long-term. You should take note of which of your disposals fall into which category.
If you dispose of your assets after holding them for less than 12 months, they should be reported on the short-term section. If you dispose of your assets after holding them for more than 12 months, they should be reported on the long-term section.
Long-term disposals are subject to more favorable tax rates.
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If your total income is more than $200,000 during the year, you may have to pay net investment income tax (NIT). This is an additional 3.8% tax on capital gains, interest income, and other forms of ‘investment income’.
Step 4. Select the correct option
In both the short-term and long-term sections, you’ll need to select one of three checkboxes. Here are the options in Part I.
(a) Short-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS
(b) Short-term transactions reported on Form(s) 1099-B showing basis wasn’t reported to the IRS
(c) Short-term transactions not reported to you on Form 1099-B
It’s most likely that you’ll select box C. At this time, most cryptocurrency exchanges do not send Form 1099-B to customers. However, if you’ve received Form 1099-B from an exchange, you’ll need to select box A or box B.
Step 5. Report your disposals on Form 8949
Now, you can get started recording your cryptocurrency disposals on Form 8949.
To better understand how to fill out the form, let’s take a look at a sample transaction history.
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Here’s how Ben’s transactions would be reported on Form 8949.
.jpeg "How to Fill Out Form 8949 for Cryptocurrency | CoinLedger (3)")
Pro Tip: If you disposed of ‘collectible’ NFTs during the tax year, you may want to report your short-term and long-term gains and losses from these assets on a separate Form 8949. Collectible NFTs are subject to a different tax rate. For more information, check out our guide to NFT taxes.
Step 6. Report your net gain or loss on Schedule D
Once you’ve finished reporting your disposals on Form 8949, you are required to report your net short-term and long-term capital gains/losses on Schedule D.
If you have any capital losses from prior years that you wish to carry forward, you can report them here.
How to generate a Form 8949 with crypto tax software
Looking for an easier way to fill out Form 8949? Crypto tax software like CoinLedger can help.
With CoinLedger, you can connect to your wallets and exchanges and import your transactions in minutes! Once you’re done, you can download completed IRS forms like Form 8949!
Get started with a free CoinLedger account today.
Do I need to fill out Form 8949 if I received a 1099 form?
If you’ve traded cryptocurrency in the past year, you may receive Form 1099 from one or more cryptocurrency exchanges. If this is the case, you are required to fill out Form 8949.
Remember, if you’ve transferred cryptocurrency into or out of an exchange, your Form 1099 may have incomplete or incorrect information about your cost basis and/or proceeds. It’s wise to double-check these forms and not completely rely on their accuracy for your tax reporting.
Do I have to fill out Form 8949 if I didn’t receive a 1099 form?
If you didn’t receive a 1099 form, you are still required to fill out Form 8949 if you have disposed of crypto during the tax year.
Remember, all of your taxable income from cryptocurrency should be reported on your tax return. Failure to do so is considered tax evasion — a serious crime with serious consequences.
How can I add my cryptocurrency Form 8949 to TurboTax?
If you’re using TurboTax or TaxAct to file your tax return, CoinLedger can help you generate a cryptocurrency capital gains report that can be imported into either platform.
For more information, read our guides to TurboTax and TaxAct imports.
What should I do if I have too many transactions on Form 8949?
In some cases, platforms like TurboTax limit the number of transactions you can report on Form 8949.
Remember, you are required to report all of your taxable disposals to the IRS. Taxpayers have the option to report consolidated total amounts on Form 8949 and provide an attached report with all the required details.
CoinLedger can help you generate a consolidated capital gains report you can import into your tax platform of choice. You can then mail in a detailed record of your cryptocurrency disposals to the IRS.
For more information, read our guide on how to mail in Form 8949.
Get started with CoinLedger
Want to generate comprehensive capital gains and income tax reports in minutes? CoinLedger can help.
More than 500,000 investors around the world use CoinLedger to simplify the tax reporting process. With integrations to the world’s biggest exchanges, the platform can save you hours of effort during tax season.
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