Crypto Tax Guide 2022

How Does The IRS Know You Have Crypto?

Many people enter the crypto market in hopes of investing in something which skyrockets in value. With the rise of public acceptance of crypto, these investments have put billions of dollars at stake. The IRS, like any other government entity, wants a cut. Crypto is no longer as private as it was originally intended.



There are a few ways that the IRS tracks who and who doesn’t have crypto, but by far the most impactful method will be through Form 1099-Bs, which will be sent out before tax day 2022. This form is expected to skyrocket crypto tax compliance within the American people, as exchanges like Coinbase and Binance send reports on individuals’ trades directly to the federal government. If taxpayers do not fill out Form 1099-Bs, or if they omit details, the IRS will know.

We go into more detail on this topic in our deep-dive on the 2021 Infrastructure Bill. There are a few issues with the government’s plan with the 1099-Bs, but it is safe to assume that the government will have a good idea of who has crypto, who doesn’t, and who is attempting to commit tax evasion.

A crypto tax is inevitable, but how you respond determines how much the government takes. This can be minimized significantly with the help of tax professionals.

How is Crypto Taxed?

In most countries which tax crypto, governments consider crypto as property. This is true in the UK, Canada, Australia, and the United States. Because crypto is property first and foremost, it is taxed as such. Much like a stock in a company, crypto can appreciate in value (increase in worth), and the owner may sell or trade it for profit. That profit is then taxed under capital gains tax. The same is true if the property depreciated in value (decreased in worth).

What is capital gains tax?

The IRS sees capital gains in two separate ways: short-term and long-term. Both have an impact on how much you are taxed at the end of the year, so it is important to keep records! For help, consider setting up a free consultation with a Yoke Tax professional.

Short-term capital gains are simply any gains (or losses) made from an asset which is held for less than a year. These gains are taxed under the same income tax bracket which you fall into. Long-term capital gains are a bit different. They focus on gains or losses for assets held for a year or more. Depending on the individual’s income, the amount which you are taxed can be much lower. Because of this, it is important that you buy to hold long term!

The IRS provides a specific guide on capital gain tax rates by income level on its website. Although the language is focused on USD, the laws apply as a crypto tax due to crypto being seen as a comparable property.

What Triggers a Capital Gains Crypto Tax?

A crypto tax is triggered on very specific events. There has been some confusion as to which events will be taxed and which won’t. Although a tax professional could easily identify what does and doesn’t count, it is important to help average people get an idea of the requirements.

Taxable events may take the form of:

• Receiving cryptocurrency as a result of a fork or mining
• Trading one crypto for another (ie Bitcoin for Ethereum)
• Trading one crypto for fiat currency (ie USD)
• Using crypto to purchase a good or service

Non taxable events are just as common, however. These include:

• Donating crypto to a 501c3 organization
• Transferring crypto between wallets owned by the same person
• Gifting crypto to others
• Buying crypto with fiat currency

There are some nuances with these events, however. For example, gifting crypto to others is not usually a taxable event, but there is one stipulation: the gift cannot exceed $15,000. Doing so subjects the giver to fees.

Connecting with a tax professional can help you avoid these situations and minimize other common crypto tax pitfalls.

Get Ready for Crypto Tax 2022

Being prepared is paramount for those who wish to stay in the good graces of the IRS. Not filing your taxes on time can lead to many serious consequences. Failing to file your taxes correctly can lead to even more.

However, this doesn’t mean that you have to lose all your gains to a crypto tax. Instead, connect with a tax pro to minimize the IRS’s impact on your hard-earned crypto. There are a few methods which we have devised to help you pay zero crypto taxes, and we would like to share them with you.