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Cryptocurrency & digital assets
Cryptocurrency Records: Preparing for a Tax Conversation
Digital-asset reporting is becoming more structured, but good records still matter. Start with every exchange and wallet, then preserve the information needed to determine income, basis, and gain or loss.
Cryptocurrency is a type of digital asset
The IRS uses digital asset as its broad term for a digital representation of value recorded on a blockchain or similar technology. Cryptocurrency is a common type of digital asset. Bitcoin, often called BTC, Ethereum or ETH, and XRP are familiar examples. For federal tax purposes, digital assets are generally treated as property, not as U.S. currency.
Stablecoins are another type of digital asset. Examples include USDC and USDT, which are designed to maintain a value linked to the U.S. dollar through issuer reserve arrangements. A stable value does not make a transaction automatically tax-free. The facts of a sale, exchange, or other disposition still matter.
Know which events may be taxable
If digital assets are held as capital assets, selling them for dollars, trading one digital asset for another, or using them to purchase goods or services can create a capital gain or loss. The amount depends on proceeds, basis, and holding period. A transfer between wallets or accounts you own is generally not a disposition by itself, although using digital assets to pay a transaction fee can be a taxable event.
Digital assets can also create ordinary income. The IRS identifies rewards from staking, mining, certain airdrops, and payment for services as examples of activity that may need to be reported. Keep the date, time, quantity, and U.S.-dollar value when an asset is received, along with the records needed to explain the transaction.
Gather records from every exchange and wallet
Create an inventory of every custodial exchange, hosted wallet, hardware wallet, and self-custody wallet used during the tax year. Download transaction histories and CSV files while access is available. Keep purchase, sale, trade, deposit, withdrawal, transfer, staking, and income records. Label each file with the platform or wallet, the asset, and the date range.
Never provide a wallet recovery phrase, seed phrase, or private key to a tax preparer. Those credentials can control the assets. A public wallet address and transaction history may be useful records, but they are not a substitute for your own complete records.
Understand Form 1099-DA and basis tracking
Form 1099-DA is used by certain brokers to report digital-asset disposition information to taxpayers and the IRS. For 2025 transactions, reporting generally focuses on gross proceeds. Basis reporting phases in for certain transactions beginning in 2026. Whether or not you receive a Form 1099-DA, taxable digital-asset activity must still be reported.
Beginning with 2025 activity, basis allocation and lot identification generally move to a wallet-by-wallet or account-by-account approach rather than a universal or multi-wallet approach. This matters when the same asset was bought at different times and prices. Records should show which units were held in each wallet or account, which lots were sold or transferred, and how the basis was determined. Broker-held assets have rules for specific identification and may default to FIFO if no adequate identification is made.
Organization matters more as reporting improves
Tax documentation in the digital-asset space is improving, but a form may not show every transaction or the correct basis for your complete activity. Foreign exchanges, self-custody activity, transfers, and older records can still require careful reconstruction. A missing 1099-DA is not evidence that a taxable transaction can be ignored.
In your consultation request, describe the year, the general types of activity, and whether you used exchanges, wallets, staking, or trades. Do not attach sensitive account records to the public form. Myrmid Tax will discuss an appropriate way to review the available documentation and determine the scope of help needed.
Sources and further reading
General educational information. Your records and circumstances determine the advice appropriate for you.
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