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Tax Filing for Digital Assets: Considerations for 2022 and 2023

March 2nd, 2023

This article was written by Mark Elsaesser, Senior Accountant, Tax & Michael Zicari, Senior Consultant

The digital asset space can be quite overwhelming with the seemingly ever-changing regulations, reporting requirements, and market trends. With tax season officially upon us, you may have some questions regarding your digital assets when filing. Below are some considerations for 2022 and 2023 tax filing:

Five Considerations for 2022 Tax Filing

  1. If you transacted in digital assets during the 2022 calendar year, be sure to get all your information over to your accountant ASAP.
  2. Pending upon the complexity of your 2022 activity, be sure to purchase and utilize a crypto tax service software.
    1. Ensure all exchange and wallet addresses with activity for the calendar year have been linked properly prior to passing the information off to your accountant.
  3. Upon linking your exchanges and/or wallets to a crypto tax service software, be sure to assess the accuracy of your capital gains/(loss) and Other Income being reported.
    1. Advise your tax professional if the calculated amounts seem off.
  4. Be sure to discuss any digital asset losses sustained throughout 2022 with your tax advisor.
    1. Especially in situations of insolvency – (i.e., FTX, Celsius, Blockfi).
  5. Expect IRS notices if your digital activity is not accurate and/or not reported:
    1. Letter 6173, Notice CP2000, Letter 6174, Letter 6174-A.

Five Considerations for 2023 Tax Filing

  1. Importance of wallet hygiene & cold storage wallet considerations.
  2. Accurate compliance and/or reporting when donating digital assets in excess of $500 and/or $5,000.
    1. When donating appreciated digital assets in excess of $5,000, a qualified appraisal report is required.
  3. Accurate compliance and/or reporting when gifting digital assets.
    1. Is the gift considered a bona fide gift?
  4. Wash sale rules currently do not apply to digital assets (or commodity futures & FOREX)
    1. Caution, the time horizon for this tax benefit is likely closing.
    2. Also, consider the possibility of retroactive actions by the IRS.
  5. Upcoming changes to ASC accounting rules will make it more favorable for businesses to hold digital assets on their balance sheets.

If you need further guidance or have any questions on filing for digital assets, we’re here to help. Please do not hesitate to reach out to our trusted experts to discuss your specific situation.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.

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