Records, forms and tax software

Working out crypto tax is mostly a record-keeping job. If the records are complete, the sums are simple. This lesson covers what to keep, what your exchange reports, and how tax software fits in.

What to keep

The IRS says you must keep records sufficient to support what you put on your tax return. It asks for records of every purchase, receipt, sale, exchange or other disposal, and the dollar value of any crypto you received as income.

In practice, for each transaction keep:

The date and time.
What it was: a purchase, sale, swap, transfer, reward or payment.
The amount of each asset in and out.
The value in dollars at that moment.
The fee, and what it was paid in.
Which wallet or account it happened in.
The transaction ID, for anything on a blockchain.

Download your history from each exchange at least once a year and keep your own copy. If an exchange closes or locks your account, the history goes with it.

Transfers between your own wallets are not taxable, but record them anyway. They show where coins came from and connect a sale to its original purchase.

What your exchange reports

From 2025, US brokers such as exchanges report your sales to you and to the IRS on Form 1099-DA.

Know its limits:

Proceeds first, basis later. Brokers report what you received for sales from 1 January 2025. They must report cost basis only for certain transactions from 1 January 2026.
Older and transferred coins are not covered. Brokers need not report basis for crypto you acquired before 2026, or for crypto you moved in from somewhere else.
Foreign exchanges may send nothing.
Self-custody and DeFi are outside it. The rules do not require reporting by decentralised or non-custodial services.

So a form can show that you sold $20,000 of crypto and say nothing about what you paid for it. The IRS says: "You must calculate basis before you file your tax return."

If a form is wrong, ask the company that issued it for a corrected one. The IRS cannot correct it for you.

And whether or not a form arrives, you must report all income, gains and losses.

Where it goes on the return

Form 8949 and Schedule D: sales, swaps and other disposals.
Schedule 1: income from staking, mining and forks.
Schedule C: crypto received in the course of a business or as an independent contractor.
Form 709: gifts of crypto that you give.

Crypto tax software

After a year of activity across several exchanges and wallets, doing this by hand is slow. Crypto tax software gathers your transactions, matches them up and produces the figures.

How it typically works:

Exchanges: you upload the history file, or connect the exchange with an API key.
Wallets: you enter the public address, and the software reads the history from the blockchain.
Transfers: it pairs a withdrawal from one account with the deposit into another, so a move between your own wallets is not counted as a sale.
Output: gains, losses and income for the year, in a report for you or your accountant.

Using it safely

Never enter a seed phrase or private key. Reading your history needs only a public address.
Create read-only API keys. A key that can only read cannot trade or withdraw. Lesson 36 covered securing exchange accounts.
Add every account. If a wallet is missing, the software cannot see where coins came from. It may show a deposit with no cost, which overstates your gain.

Checking the result

Software sorts transactions by rules, and the rules can guess wrong.

Look for warnings about missing history or balances below zero. They usually mean a missing account.
Check the labels. A reward marked as a transfer, or a transfer marked as a sale, changes the tax.
Compare the closing balances in the software with what you hold.
Review DeFi activity by hand. Lesson 60 explains why it is the hardest part.

You sign the tax return. The software's answer is your responsibility.

A scam to know

The IRS warns that it does not require you to register your digital assets. Ignore any letter with a QR code that asks you to register on a "compliance portal".