August 2026- Q&A, Virtual Currency

Q&A with virtual currency

Q1. How do I account for a sale, exchange, or other disposition of units of virtual currency if I do not specifically identify the units?
A1. If you do not identify specific units of virtual currency, the units are deemed to have been sold, exchanged, or otherwise disposed of in chronological order beginning with the earliest unit of the virtual currency you purchased or acquired; that is, on a first in, first out (FIFO) basis.

Q2. If I engage in a transaction involving virtual currency but do not receive a payee statement or information return such as a Form W-2 or Form 1099, when must I report my income, gain, or loss on my federal income tax return?
A2. You must report income, gain, or loss from all taxable transactions involving virtual currency on your federal income tax return for the taxable year of the transaction, regardless of the amount or whether you receive a payee statement or information return.

Q3. Where do I report my capital gain or loss from virtual currency?
A3. You must report most sales and other capital transactions and calculate capital gain or loss in accordance with IRS forms and instructions, including on Form 8949, Sales and Other Dispositions of Capital Assets, and then summarize capital gains and deductible capital losses on Form 1040, Schedule D, Capital Gains and Losses.

This newsletter contains general information for taxpayers and should not be relied upon as the only source of authority.  Taxpayers should seek professional tax advice for their specific tax situation and for more information.