Cryptocurrency
Overview
Use is treated and reported like property, but sometimes like stock transactions.
Sec 1031 exchanges no longer apply to crypto after 2017.
Related IRS Publications and Forms
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Form 1099-DA
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Notice 2014-21 – Taxability of virtual currency transactions
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Notice 2023-27 – Treatment of NFTs as collectibles
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Notice 2023-34 – Modifies language in Notice 2014-21
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Currency Converter – https://www1.oanda.com/currency/converter/
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IR-2018-71
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Rev Rul 2019-24 (October 2019)
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Rev Rul 2023-74 (March 2023)
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T.D. 10000 [final regs 7/9/2024. . .365 pages]
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IRS Fact Sheet: FS-2024-23 (June 2024)
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Notices 2024-56 & 2024-57 (July 2024) – Broker Penalty Relief
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Rev Proc 2024-28 (July 2024) – Digital Assets Basis Allocation
Final Broker Reporting Rules – Effective for the 2025 Tax Year
The Treasury finalized a rule on June 28, 2024, requiring cryptocurrency brokers, including exchanges and payment processors, to report new information on users' sales and exchanges of digital assets to the IRS and taxpayer. Reporting will be on new Form 1099-DA (draft copy page 1.18.08)
The new requirements aim to crack down on crypto users who may be failing to pay their taxes, and stem from the 2021 Infrastructure Investment and Jobs Act. When the bill was passed, it was estimated its provisions would produce close to $28 billion in taxes over a decade.
The rule, which would be phased in starting in 2025 as the first reporting year (2026 tax filing season), align the tax requirements for cryptocurrencies with existing tax reporting requirements for brokers for other financial instruments, such as bonds and stocks, according to the Treasury Department.
The final rule was modified from Treasury's original proposal to limit some burdens on brokers and to phase in the new requirements in stages. It also includes a $10,000 threshold for reporting on transactions involving stablecoins, a type of crypto token typically pegged to an asset like the US dollar.
California Differences
California follows federal tax treatment.