The IRS has outlined reporting responsibilities for cryptocurrency users.
Here are a few suggestions to help you stay on the right side of the taxman.
Think beyond sales: If you bought a cup of coffee from a merchant that accepts virtual currency, you’ll need to report it.
“You can get cryptocurrency as a gift or for payment,” said Benson. “It’s a cost basis event, and you have to manually record the fair market value you when you received it.”
Track everything: Maintain records of your transactions and translate them to U.S. dollars. At least you’ll be ready if the IRS comes knocking.
“When you’re buying and selling coins, track the date and the amount paid,” said Morin.
Don’t assume you can swap cryptocurrency free of taxes: Traders have made tax-free “like-kind” exchanges of virtual currency in the past. Don’t assume that the IRS will continue to allow this.
“Like-kind exchanges must be of real property, like houses and buildings — it can’t be coins,” said Morin. If you have swapped one virtual currency for another, you still need to report the “like-kind” exchange to the IRS and track the basis.
“The key issue with a lot of these transactions is that it’ll be better to try to do the best you can,” said Morin. “Do the best you can rather than avoiding it altogether.”