Cryptocurrency Savvy – Know What the IRS Knows
Have you wondered what the government knows about your crypto transactions? If cryptocurrency investment is supposed to be encrypted and private, what does the IRS get to see?
There are three main sources of information the government gets:
1.) Voluntarily provided data.
This is the information that you share on your tax returns.
2.) Data that becomes available via IRS summonses or brokers.
This is especially troublesome because you will never know when your broker shared information with the IRS. But when they do, the broker shares everything, including everything about your crypto activities.
3.) Data that is submitted by Form 1099B.
About Form 1099B
This Form 1099B data is the IRS’s most desired form of crypto transaction information because it is convenient to the government. This data is electronically submitted, and can be analyzed again and again.
Not all brokers are yet issuing 1099 Forms for crypto transactions. But by 2024, all US-based brokers will.
This will be, by far, the IRS’s primary source of information about your crypto transactions.
Why do we care? Not everyone receives all of their Forms 1099. Some of the forms may not reach you, for whatever reason.
But remember that this info is submitted to IRS electronically. That means you can always verify what was sent to the IRS.
So What Should You Do?
Recommendation: Call IRS and ask for a Wage & Income transcript.
This will help you accurately report your activity, because you can see exactly what was reported on the Forms 1099. This will help your reporting to be more complete.
Better said, having an IRS transcript will help you avoid incomplete reporting.
You can avoid flying blind. See most of what IRS sees.
Avoid getting an Underreporter Audit simply because you did not confirm what was reported by your brokers. Verify this way, with a Wage & Income Transcript.
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