Any cryptocurrency trading must be reported to the IRS this year. However, exchanges are not required to send 1099-B forms to taxpayers until 2023, so the onus is on you to make sure you are providing the IRS with the correct information.
It is worth noting that if you buy a cryptocurrency and just leave it in a wallet, then you do not need to inform the IRS about this purchase. You only need to file a return if any of the following apply:
- You have traded one type of cryptocurrency for another.
- You have sold cryptocurrency for any government-issued currency.
- You have used cryptocurrency to pay for goods or services.
The fact that any of these events take place does not necessarily mean that you will owe any tax, but they do need to be reported.
If any of the above apply to you, then there are things you can do to ensure that you have all the information you need to be able to file the return correctly.
In order to work out the amount of tax that you may owe, the IRS will need to know the date you bought the currency and how much you paid, along with the date you sold it and how much you sold it for. Depending on how long you have owned the asset, you will either be taxed at the long-term, or short-term rate. If you have made a loss on trading cryptocurrency, then you may be able to deduct these losses from your total tax bill.