When you invest in crypto and other digital currencies don’t be 
surprised by the complications this adds at tax time. These transactions can take many forms and each form can result in a unique tax reporting challenge.
Things as simple as trading or buying one kind of crypto or digital currency with another results in a taxable transaction and must be reported in U.S. Dollars — even if no dollars were involved. These transactions are not eligible for like kind exchange deferrals.
Take digital currency in payment for goods or services; you must report the FMV of the digital currency in the gross sales (revenue) reported for the business. Sell that same digital currency received and reported as business revenue? You will need to recognize gains or losses on the sales based on the current price and FMV recognize at the time received. Receive proof-of-stake blockchain rewards as additional units of cryptocurrency? These must be reported in the year received at their FMV at the time received. Mining crypto or digital currency? You now have business income based on the FMV when mined and business expenses to deduct based on the cost of mining.
If you think this seems very complicated, you’re starting to get it. While the IRS is working hard to make sure the government gets its “fair share”, it’s not always clear just what goes where on a tax return. The accounting practices to figure out just what is and is not taxable can be complex and expensive.
When it comes to crypto and digital currency not every tax professional knows what to do. It’s important to make sure you have someone that can not only get the tax reporting correct but can also defend the reporting should the IRS come calling is important.