07 Apr My son trades crypto. What needs to be on his tax return?

Q. My son is in college and I still take care of preparing his tax return. He’s been trading a little crypto. What’s the easiest way to get all the trades together for tax time? I understand not every company provides the right forms you need to do taxes?
— Mom

A. Oh, what parents do for their children.

Cryptocurrency trades have been a reporting headache for some.

If the third-party brokerage firm or financial institution does not provide him with a capital gains schedule listing all of the crypto sales he made, you will somehow have to piece them all together, said Neil Becourtney, a certified public accountant and tax director with Smolin, Lupin & Co. in Red Bank.

It could require a detailed analysis of 12 monthly account statements from 2022 to list every sale and then to match the associated cost, he said.

Rather than having to enter each and every transaction as a separate sale on IRS Form 8949 that feeds into Schedule D, in the event you are unable to obtain capital gains schedules, Becourtney suggests you create your own capital gains schedule using a spreadsheet.

“Use the same columns found on Schedule D – asset description with quantity, date acquired, date sold, sales proceeds and cost,” he said. “Prepare one spreadsheet for short-term sales — holding period of one year or less — and a second spreadsheet for long-term sales — holding period of more than one year. Then similar to third party-supplied capital gains schedules, you merely will need to enter the totals and attach the referenced schedule as support.”

Becourtney said the IRS has made it abundantly clear that it is concerned over the reporting of what it calls digital assets.

“On page 1 of Form 1040 immediately below the taxpayer’s name and address is the following question: `At any time during the year did you receive, sell, exchange, gift or otherwise dispose of a digital asset?’” he said.

Also note the IRS defines a digital asset as any digital representations of value that are recorded on a cryptographically secured ledger or any similar technology including non-fungible tokens (NFTs) and virtual currencies such as cryptocurrencies and stablecoins, he said.

Email your questions to .

This story was originally published on April 7, 2023.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.