What are the latest IRS rulings affecting cryptocurrency reporting?

The IRS has repeatedly clarified how taxpayers must report cryptocurrency activity. These rulings reinforce three core points: (1) most crypto is treated as property for tax purposes, (2) sales, exchanges, and some non-sale receipts create taxable events, and (3) accurate records and increasingly granular information reporting are essential. Below I summarize the most important rulings and guidance, explain what they mean in practice, and provide clear, actionable steps you can take when filing.

Key IRS rulings and guidance (what to know)

  • Notice 2014-21: The foundational position from the IRS is that virtual currency is property for federal tax purposes. That classification means normal capital gains rules apply to sales or exchanges of crypto rather than the tax treatment used for foreign currency. (See IRS virtual currency guidance: https://www.irs.gov/businesses/small-businesses-self-employed/virtual-currencies.)

  • Revenue Ruling 2019-24: The IRS addressed hard forks and airdrops, focusing on when taxpayers have constructive receipt or dominion and control over new tokens; when they do, the receipt may be taxable as income. The ruling clarifies the timing of recognition for certain types of ‘new’ tokens.

  • IRS FAQs and ongoing guidance: The IRS publishes and updates FAQs about mining, staking, airdrops, and other crypto activities. These FAQs consistently treat mining rewards, staking rewards, and certain airdrops as ordinary income when the taxpayer has control or the reward is received (see the IRS virtual currency pages linked above).

  • Increased information reporting efforts: The IRS and Treasury have emphasized expanding information returns and broker reporting to cover digital asset transactions. That means exchanges and custodial services are under growing pressure to issue 1099‑series forms or similar statements, and the IRS is seeking more data to reconcile taxpayer filings.

Note: IRS guidance evolves. The links above point to the IRS’s central virtual currency resource, which aggregates Notices, Revenue Rulings, and FAQs.

What these rulings mean for common crypto activities

  • Buying and selling (trading) crypto: When you sell cryptocurrency for fiat, trade one crypto for another, or use crypto to buy goods or services, you generally realize a gain or loss equal to the difference between your cost basis and the fair market value at disposition. Gains are capital in nature unless the activity is a trade or business.

  • Receiving crypto as payment or compensation: If you’re paid in crypto (employee wages, contractor payments, or business receipts), treat the fair market value at receipt as ordinary income and report it as such on your return.

  • Staking and mining: Staking rewards and mining income are typically treated as ordinary income when you receive or constructively receive the reward and must be included in gross income at fair market value. Later sales of those rewards create capital gain or loss based on their new basis (the value you reported as income).

  • Airdrops and hard forks: Under Revenue Ruling 2019‑24 and IRS FAQs, airdrops or newly created tokens following a hard fork can be taxable when the taxpayer has dominion and control of the tokens. If you cannot access or control them, the IRS has historically indicated no income is recognized until you do.

Forms and reporting you’re likely to use

  • Form 8949 and Schedule D: Report capital gains and losses from sales and exchanges.

  • Form 1040 (Schedule 1 and other lines): Report ordinary income items (staking, mining, freelance payments received in crypto) on the appropriate line(s) of your Form 1040.

  • Information returns from third parties: Many exchanges issue 1099‑series forms (1099‑B, 1099‑MISC, etc.) or account summaries. Reconcile any third‑party statements with your records. The IRS may compare exchange reports to taxpayer returns when matching income.

For a detailed step‑by‑step on reporting trades and calculating basis, see our guide: How to Report Cryptocurrency Transactions on Your Tax Return.

Practical examples and sample calculations

  • Example — Sale with capital gain

  • You bought 2 BTC at $5,000 each (total basis $10,000).

  • You sold 2 BTC later for $8,000 each (total proceeds $16,000).

  • Capital gain = $16,000 − $10,000 = $6,000 (short‑ or long‑term depending on holding period).

  • Example — Staking reward then sale

  • You receive 1 token as a staking reward when FMV = $200. You report $200 as ordinary income and establish a basis of $200.

  • Later you sell that token for $500. You report a capital gain of $300 ($500 − $200).

Common filing pitfalls and how to avoid them

  • Incomplete basis tracking: Not keeping purchase dates and costs creates mismatches between your tax return and third‑party reports. Keep CSV exports, wallet transaction logs, and exchange statements.

  • Treating crypto as currency: Crypto is generally not treated as cash for U.S. tax purposes. Applying the wrong tax rules (e.g., ignoring capital gains) is a frequent error.

  • Ignoring ordinary‑income events: Airdrops, staking rewards, and crypto received as compensation can create ordinary income even if you never sold anything.

  • Overreliance on exchange statements: Exchanges sometimes omit transactions (like internal transfers or wallet conversions). Reconcile exchange data with your own records.

For recordkeeping best practices, our article on Cryptocurrency Recordkeeping Best Practices for Tax Reporting explains formats, key fields to capture, and software options.

How to prepare if you expect IRS scrutiny

  1. Gather transaction history: Export full CSVs from exchanges and wallets, with timestamps and USD values at each event.
  2. Reconcile third‑party forms: Match 1099s and account summaries to your records; document and investigate differences.
  3. Identify income events: Tag where and when you received tokens (airdrops, staking, payroll) and the FMV at receipt.
  4. Consider an amended return if errors are material: If you omitted income or misreported basis, an amended return can reduce penalties compared with waiting for an audit notice.
  5. Consult a tax professional experienced with crypto: Complex cases—like chain splits, pooled staking, or international exchanges—often need expert help.

If you’re responding to an IRS notice related to crypto, see our procedural guide on how to assemble records and communicate effectively with the IRS in: Reporting Cryptocurrency on Your Tax Return: Responding to IRS Notices.

Professional tips from practice

  • Establish records at the time of the transaction. In my work with clients, immediate capture of date, amount, FMV, transaction ID, and purpose cuts the time needed to prepare an accurate return by 70–90%.

  • Use dedicated crypto tax software to normalize transactions across wallets and exchanges. These tools reduce manual errors and generate draft Form 8949 entries and gain/loss reports.

  • When in doubt, report conservatively. The tax cost of reporting income you can substantiate is typically lower than the risk of an audit and penalties later.

What to watch for next (regulatory trends)

  • Expanded broker reporting: Expect continued Treasury and IRS focus on expanding and enforcing information reporting from exchanges and other intermediaries.

  • Clarifications on DeFi and pooled activities: Guidance around DeFi protocols, automated market makers, and pooled staking remains limited; the IRS has signaled these are enforcement priorities.

  • International enforcement and exchange subpoenas: The IRS is improving cross‑border cooperation and data‑gathering to trace offshore or unreported crypto assets.

Final checklist before filing

  • Do you have a complete transaction history for the tax year? (buys, sells, trades, transfers, airdrops, staking rewards)
  • Did you record fair market value at the time of income recognition for any staking, airdrop, or mining rewards?
  • Have you reconciled third‑party forms with your own records and corrected errors or requested corrected 1099s when necessary?
  • Have you used Form 8949 and Schedule D for capital transactions and reported ordinary income items in the correct places on Form 1040?

Professional disclaimer

This article is educational and reflects commonly available IRS rulings and guidance as of 2025, including the IRS virtual currency guidance and Revenue Ruling 2019‑24. It is not personalized tax advice. For help tailored to your situation, consult a qualified tax professional or CPA. Key primary sources: IRS virtual currency guidance (https://www.irs.gov/businesses/small-businesses-self-employed/virtual-currencies), Revenue Ruling 2019‑24, and Notice 2014‑21.

Author note

I am a CPA and CFP® with more than 15 years helping individuals and small businesses with tax compliance. In practice I see recurring errors in basis tracking and missed ordinary‑income recognition; early, consistent recordkeeping and professional review substantially lower audit risk.

Further reading

(Authority: IRS virtual currency guidance and published revenue rulings and notices.)