Understanding IRS Reporting Requirements for Crypto Trades
The IRS treats virtual currency as property, meaning standard tax principles for property transactions apply. Key points:
- Capital gains/losses: Must be reported when selling crypto
- Threshold: You'll receive a Form 1099 from Robinhood if you sold $600+ worth of crypto or earned equivalent rewards
- Professional advice: Robinhood recommends consulting a tax professional for specific guidance
👉 Learn more about crypto tax strategies
Calculating Your Crypto Cost Basis
Cost basis determines your capital gains tax liability. Here's how Robinhood handles it:
| Acquisition Method | Cost Basis Availability |
|---|---|
| Purchased via Robinhood | Provided |
| Received as rewards | FMV at time of receipt |
| Transferred from other providers | Not available |
Important notes:
- Robinhood uses FIFO (First-In-First-Out) method for tax lot accounting
- Transfers with $0 cost basis are processed first
- You're responsible for calculating basis when Robinhood lacks data
Official IRS Crypto Tax Guidance
The IRS released proposed cryptocurrency tax regulations on August 25, 2023. Key upcoming changes:
2025 Updates
- Form 1099-DA: Will replace 1099-B for crypto reporting
- Reporting: Gross proceeds reported to IRS (similar to current 1099-B)
2026 Updates
- Expanded reporting including transfers of crypto assets
- Basis reporting to both IRS and customers
👉 Stay updated on crypto tax changes
Special Crypto Scenarios
Merges and Hard Forks
- May trigger 1099 reporting if you receive new cryptocurrency
- No reportable events occurred this tax year for supported coins
Year-End Cutoff
All crypto trades must be completed by 11:59 PM UTC on December 31 for inclusion in current tax year reporting.
Frequently Asked Questions
Do I need to report small crypto transactions?
Yes, all taxable events must be reported regardless of amount, though you'll only receive a 1099 for $600+ transactions.
How are crypto rewards taxed?
Rewards are treated as ordinary income at their fair market value when received.
What if I transferred crypto between wallets?
Transfers aren't taxable events, but you must track cost basis when transferring between services.
When will the 1099-DA form be implemented?
The new form is scheduled for 2025 tax reporting.
Important Disclosures
Robinhood does not provide tax advice. Consult a qualified tax professional for personalized guidance regarding your crypto transactions.
Remember: Maintaining accurate records of all crypto transactions is essential for proper tax reporting.