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ROCHESTER, N.Y. (WROC) As cryptocurrency becomes more popular, its important to know whats required of you on tax forms. While some people may see cryptocurrency as a virtual currency, in the eyes of the IRS, its not a true currency.

So what does this mean when it comes to reporting cryptocurrency on tax forms? News 8s Ally Peters spoke with CPA David Young, with the New York State Society of CPAs, to know more.

The IRS has taken a very keen interest in cryptocurrency, so keen that on the front page of your tax return, theyre asking: At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in virtual currency? Yes or no?, Young said.

Young says this means if youve transacted with cryptocurrency, you must report it. The IRS considers cryptocurrency to be a property and capital gains and losses should be reported on Schedule D and Form 8949 if necessary.

If you held on to a crypto for more than a year, its a long-term capital gain, and if its less than a year, its a short-term capital gain, which has to be reported on your tax return on your Schedule D, Young said.

Young adds for long-term capital gains, the long-term capital gains rate applies, which varies from 0% to 20%, depending on your ordinary income tax rate. For short-term capital gains, the capital gains from your crypto or Bitcoin transactions are added to your income and taxed at your ordinary income tax rate.

No. If you buy crypto, you do not, Young said. But when you need to report crypto on your taxes is if you were to say you bought crypto a couple of years ago, now you sold the crypto, maybe you sold it, just exchange it, or if you go from one set of crypto to another set of crypto, went from a to b, thats a sale and it does have to be reported on your Schedule D on your tax returns, Young said.

Young said if you dont report crypto on your tax return, its a problem because the IRS is getting a record.

A lot of times the places that hold your crypto, report to the IRS and they should be sending you a 1099 and so the IRS knows you have this crypto. And even if the IRS didnt know it, its still the right thing to do, Young said.

So if you didnt report it in the past, you need to go back and amend, because if you did not, youre setting yourself up for an IRS audit, which means you could have penalties and interest and additional taxes.

Young said a lot of companies will give you the option to go to their portal or website and download everything into a CSV format, which you can put into Excel.

That way you can parse out all your gains and losses, Young said. Now, ultimately, theyre going to give you a 1099, but if you go to their website, many of the larger exchanges will help you as their customer, parse out all your gains and losses. And you can use that spreadsheet or data to prepare your correct income tax return.

To learn more about cryptocurrency and taxes, or to contact a CPA, visit the New York State Society of CPAs website.

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