Form 8949 Crypto Tax: What You Need to Know to File Correctly

When you sell, trade, or spend cryptocurrency, the Form 8949, a U.S. IRS tax form used to report capital gains and losses from asset sales. Also known as Capital Gains and Losses, it's the backbone of how the IRS tracks your crypto activity. This isn’t a suggestion—it’s a legal requirement if you made any profit, even a few dollars. If you bought Bitcoin in 2020 and sold it in 2024 for more than you paid, that’s a taxable event. Same goes for trading ETH for SOL, using BTC to buy a laptop, or swapping tokens on a DEX. The IRS doesn’t care if it was a small trade or a big win—you still owe taxes on the gain.

Form 8949 works hand-in-hand with Schedule D, the IRS form that summarizes capital gains and losses from Form 8949 for your tax return. You fill out Form 8949 first, listing every single crypto transaction: date bought, date sold, cost basis, proceeds, and gain or loss. Then Schedule D adds it all up. Many people think exchanges like Coinbase or Kraken will send them a 1099 and that’s enough. But those forms are often incomplete, missing internal trades, DeFi swaps, or NFT sales. You’re responsible for tracking everything—even if the exchange doesn’t report it.

Missing Form 8949 doesn’t mean you’ll get audited tomorrow. But if you do get audited, and you didn’t file it, you’re looking at penalties, interest, and possibly criminal charges for tax evasion. The IRS has been matching data from major exchanges since 2021, and they’re now going after smaller platforms and DeFi protocols. If you used Uniswap, PancakeSwap, or a wallet like MetaMask to trade, those transactions are still taxable. You can’t hide them by saying "I didn’t cash out." Selling crypto for another crypto is still a sale in the eyes of the IRS.

What about losses? You can use them to offset gains, and even deduct up to $3,000 against your ordinary income each year. But you still have to report them on Form 8949. Ignoring losses doesn’t help you—it just makes your filing look suspicious. The IRS doesn’t need you to be perfect. They just need you to be honest and complete. Tools like Koinly, CoinTracker, or ZenLedger can auto-generate Form 8949 from your wallet history. But you still need to review it. These tools can miss airdrops, staking rewards, or forked coins that also trigger tax events.

If you’re unsure whether you need to file, ask yourself: Did I move crypto out of my wallet for anything other than another wallet I own? If yes, you likely have a taxable event. And if you’ve done that more than once in the last year, you’re probably required to file Form 8949. This isn’t about being rich—it’s about being compliant. Even small traders get caught. And once you’re flagged, the IRS doesn’t forget.

Below, you’ll find real-world breakdowns of crypto tax scenarios, common mistakes people make when filing, and how to avoid IRS trouble—even if you’ve been late to the game. Whether you’re just starting out or you’ve been trading for years, the rules haven’t changed. What’s changed is how seriously they’re enforcing them.