Nov 16, 2023

Jackson Hewitt Chief Tax Information Officer Mark Steber breaks down the basics of filing for crypto taxes and what new investors should keep in mind.

Video transcript

If you're happy with something that's happening, you, you're probably doing something that's really good. And if you're earning, then you might have a taxable transaction at its simplest level. If you're buying or selling a stock and you have a gain, you have a reportable transaction, the crypto market is treated a lot like that. If you buy a digital asset, no real problem with that. But as soon as you convert it, whether you sell it or trade it, if you have a gain, you probably have a reportable event. If you have a loss, you could have a deduction. Now, once you get into splits and forks and drops and all of those things, you know, if you're happy again, I'm gonna go with a very simple binary test, then you probably have something that you need to take into consideration. Now, not everything that happens. For example, if you have a split that doesn't necessarily create a taxable event. But the number one mistake I see in the digital asset arena is when you have a trade, when you buy crypto one, you don't necessarily sell it, but you trade it for an other one. A lot of people I talked to say, well, I didn't cash out, I didn't sell that asset. Well, converting an asset under the tax code is a lot like selling. You had an asset, you traded it for a new asset. You might have had gain or you might have had a loss. And at that point, you have a reportable transaction right now, your exchange might or might not send you an information report, you might not have something that was sent to you that tracks all that. But in 2025 rest assured you will and so will the IRS if you've got that information? Great. But here's another mistake that I see a lot of people making just because you didn't get an information statement and that extends to W twos or other 1090 nines does not in any way change your reporting responsibility to the IRS or your state. If you had a gain, you're supposed to put it on your tax return. And as I started and I'll stop here and say crypto is a really, really complex area. Gains aren't all, they seem basis is equally complicated and you might not know. And if you don't, you need to find someone who can help you.

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