You may owe taxes on your crypto investments — here are 3 things to know

If you invested successful cryptocurrency past year, the U.S. authorities wants its cut.

The Internal Revenue Service (IRS) is getting much superior astir tracking virtual currency transactions, and for the 2022 taxation twelvemonth present straight asks filers whether they received oregon sold immoderate integer assets implicit the past twelvemonth connected Form 1040, Form 1040-SR and Form 1040-NR.

If you've bought oregon sold crypto, present are 3 things to support successful caput astatine taxation time.

One of the biggest misconceptions cryptocurrency investors person is that their crypto can't, oregon won't, beryllium taxed, Shehan Chandrasekera, a certified nationalist accountant and caput of taxation strategy astatine crypto taxation bundle institution CoinTracker, tells CNBC Make It.

But it tin be. Since 2014, the IRS has treated virtual currency arsenic property for national income taxation purposes, according to the agency's website.

Similar to stocks, crypto is taxable to IRS rules surrounding capital gains and losses. That means that if you earned a nett by selling your crypto for much than what you purchased it for, you'll beryllium superior gains taxation connected the difference.

Say you bought $500 worthy of crypto and sold it for $600. The $100 quality would beryllium considered a superior summation and taxable to superior gains tax, which is typically taxed astatine a little complaint than mean income.

If you sold your crypto for little than what you paid for it, that would beryllium considered a superior loss. The IRS allows investors to usage superior losses to offset taxable superior gains. Additionally, superior losses tin beryllium utilized to trim your regular taxable income by up to $3,000 per twelvemonth if your superior losses transcend your yearly superior gains.

Other taxable events see if you've utilized crypto to bargain a merchandise similar java oregon if you've been paid successful crypto to bash a job, Chandrasekera says. However, you typically wouldn't beryllium taxed if you lone purchased crypto utilizing fiat currency similar the U.S. dollar, moved your crypto from 1 virtual wallet to different oregon received crypto arsenic a gift.  

Another misconception among crypto investors is that the IRS isn't capable to spot your crypto trading activity, and truthful you don't person to study it astatine taxation time, says Chandrasekera.

Although crypto is thought to beryllium anonymous, regulators person a fig of ways to link your virtual activities to the existent world.

If you commercialized connected centralized exchanges similar Coinbase oregon Gemini, those exchanges person to study to the IRS. Typically, they'll nonstop you a 1099 miscellaneous form detailing immoderate income you've earned portion trading crypto connected their platform, Chandrasekera says.

Coinbase, for example, sends this signifier to customers who earned much than $600 successful crypto, according to its website. However, you inactive request to study your net to the IRS adjacent if you earned little than $600, the institution says.

The IRS tin besides spot your cryptocurrency enactment erstwhile it subpoenas virtual trading platforms, Chandrasekera says. There whitethorn beryllium thousands of names wrong the files companies crook implicit to the government, which the IRS could usage to verify if you person reported your trading enactment to the government, helium says.

And remember, adjacent if you don't usage a large level and don't deliberation the authorities volition beryllium capable to way your crypto trades, you inactive request to study income, gains oregon losses from each taxable transactions involving cryptocurrency, according to the IRS website. 

"The biggest mistake radical marque with crypto is keeping close records of their transactions," says Douglas Boneparth, a certified fiscal planner, president and laminitis of Bone Fide Wealth and a subordinate of CNBC's Financial Advisor Council.

It mostly falls to investors to study cryptocurrency investments oregon net astatine taxation time. That means you'll request to support way of each acquisition oregon merchantability and the circumstantial details of those transactions, Boneparth says.

Tools specified arsenic Cointracker tin assistance you support way of crypto transactions and automatically make the indispensable taxation forms, Chandrasekera says.

Additionally, if you request much clip to reconcile your crypto activity, you person the enactment to widen your filing deadline from April 18 to Oct.16 this year. But support successful caput that if you beryllium wealth to the government, you'll inactive request to wage by the April 18 deadline, according to the IRS website.

More accusation connected however the IRS taxes crypto tin beryllium recovered connected the agency's website.

DON'T MISS: Want to beryllium smarter and much palmy with your money, enactment & life? Sign up for our caller newsletter

Get CNBC's free Warren Buffett Guide to Investing, which distills the billionaire's No. 1 champion portion of proposal for regular investors, do's and don'ts, and 3 cardinal investing principles into a wide and elemental guidebook.

Check out: This loophole could assistance crypto investors little their taxation bill—but don’t maltreatment it, says CPA