A detailed guide to correctly filling out IRS Form 8949 & Schedule D for your crypto trades
Cryptocurrency has gone mainstream—but so has IRS enforcement. Whether you’re an individual investor or an institutional trader, the tax implications of buying, selling, or trading crypto assets can be complex and overwhelming. The IRS treats cryptocurrency as property, meaning every trade is a taxable event that must be accurately reported.
Two critical forms in the crypto tax reporting process are Form 8949 and Schedule D. Used together, they detail capital gains and losses from crypto activity, and failing to file them correctly can result in IRS penalties, audits, and interest charges.
At CountDeFi, we specialize in simplifying this process. This guide provides a detailed breakdown of Form 8949 and Schedule D, outlines common pitfalls, and demonstrates how our expert-led reconciliation services ensure full IRS compliance with minimal effort on your part.
Key Takeaways
- Form 8949 is used to report each individual crypto transaction, including cost basis and proceeds.
- Schedule D summarizes total capital gains and losses reported on Form 8949.
- Crypto transactions must be accurately categorized as short-term or long-term based on the holding period.
- Missing records, incorrect cost basis, or improperly reported transactions are common IRS red flags.
- CountDeFi automates and validates your entire crypto tax report—eliminating guesswork and ensuring audit-ready compliance.
Understanding Form 8949
IRS Form 8949 is where every taxable crypto event must be reported. Each line represents a single transaction and must include:
- Description of Property: e.g., “0.5 BTC”
- Date Acquired and Date Sold
- Proceeds (in USD): Amount received upon sale
- Cost Basis (in USD): Original purchase price
- Adjustment Codes: Such as disallowed losses (e.g., wash sales for other property types)
- Gain or Loss
Crypto-Specific Challenges with Form 8949
- High Transaction Volume: Unlike traditional assets, crypto traders often have hundreds—or even thousands—of trades across multiple platforms.
- Missing Data: Many exchanges don’t provide full historical trade data, especially if users moved assets across wallets or blockchains.
- Complex Instruments: Staking, airdrops, liquidity pool withdrawals, NFTs, and wrapped tokens each require specialized treatment.
What Is Schedule D?
Schedule D (Capital Gains and Losses) is the IRS form used to summarize all capital transactions from Form 8949, broken down into:
- Short-term capital gains/losses (held for one year or less)
- Long-term capital gains/losses (held more than one year)
This summary determines your net capital gain or loss for the tax year and is incorporated into your Form 1040 (your individual tax return).
Common Mistakes to Avoid
Filing crypto taxes manually or with general tax software often leads to critical errors, such as:
1. Omitting Wallet-to-Wallet Transfers
These aren’t taxable, but failing to track them can result in missing cost basis—making gains look larger than they actually are.
2. Double Counting Income
Airdrops, forks, or staking rewards might be reported both as income and again as gains upon sale—this inflates taxable income unless properly reconciled.
3. Inaccurate Cost Basis
If the exact purchase price isn’t tracked, the IRS may assume a zero cost basis, leading to 100% gains being taxed.
4. Improper Holding Period Classification
Mislabeling long-term gains as short-term can result in unnecessary higher tax liabilities.
5. Failing to File at All
Many believe crypto trades are anonymous or under-the-radar, but the IRS’s use of John Doe summonses and exchange reporting (1099-DA coming soon) make non-filing a risky strategy..
How CountDeFi Can Help
At CountDeFi, we specialize in crypto tax reconciliation and IRS-compliant tax reporting for both US and international clients. Here’s how we bring peace of mind:
End-to-End Reconciliation
We consolidate data across all your wallets, exchanges, and DeFi platforms, ensuring a single, audit-proof record.
IRS-Ready Form 8949 & Schedule D
We generate complete and accurate Form 8949 and Schedule D documents, tailored to IRS standards, and ready for upload into tax filing platforms or CPAs.
Cost Basis Calculations You Can Trust
Whether you use ACB, FIFO, LIFO, or Specific Identification, we ensure your gains and losses are calculated correctly—no matter how complicated your trading history.
Expert Guidance, Human Support
Confused about NFTs, token migrations, staking income, or airdrops? Our team knows the latest IRS guidelines and provides professional, personalised crypto tax reporting – this is not a cookie-cutter approach.
Peace of mind, Globally.
Whether you’re a US citizen, an expat, or a global investor with US tax obligations, CountDeFi ensures your crypto tax reports are handled with precision.
FAQs
Q: Do I need to report every crypto transaction on Form 8949—even losses?
A: Yes. The IRS requires that all crypto disposals, including losses and break-even trades, be reported on Form 8949.
Q: What if I use multiple wallets and exchanges?
A: CountDeFi specializes in aggregating data from all platforms—centralized and decentralized—so your report is complete and accurate.
Q: Can I deduct crypto losses on my taxes?
A: Yes, capital losses can offset capital gains. If your net loss exceeds gains, up to $3,000 can be deducted against ordinary income each year, with excess carried forward.
Q: How do I know if my staking or mining rewards are taxable?
A: The IRS considers staking and mining income taxable at fair market value at the time of receipt. We ensure these are properly classified and included in your return.
Q: What’s the penalty for not filing Form 8949 and Schedule D?
A: Failure to report can lead to penalties, interest, and potential audits. The IRS has increased crypto enforcement and is now matching tax filings against 1099-K and 1099-B data from exchanges.
Looking Ahead
Crypto taxation in the US is only going to get more complex. As regulators catch up with technology, expect greater clarity but also more obligations. Whether you’re investing casually or operating a Web3 business, now is the time to get compliant and optimize your strategy.
Need help with crypto taxes?
Count DeFi specializes in crypto tax reporting, optimization, and audit readiness. Book a call today to get started.