Overview
The goal of this page is to inform you about whether, when, and how to file your taxes for Bitcoin activity.
How is Bitcoin classified by the IRS?
The IRS has stated in Notice 2014-21 that Bitcoin is a virtual currency to be treated as property. For that reason, many of the rules and processes that you may be familiar with from filing taxes for other investments are relevant to Bitcoin. For example:
- Taxes are based on capital gains or losses from the sale of Bitcoin
- The tax rate is variable, based on factors such as the duration that the asset was held (Short Term vs Long Term) and your income
- Wash sale rules do not apply for tax-loss-harvests here in the United States.
If you are looking to read more about whether, when, and how taxes are applied, we recommend reading the following links:
I didn't sell any Bitcoin. Do I owe taxes?
For most people, the answer is "no"! You likely do not need to pay taxes for buying and holding Bitcoin, and you will not receive a 1099-B as such.
That said, you may receive up to three other tax forms (table below) depending on whether you held Bitcoin in a retirement account or received more than $600 in Swan Force payments. Always rely on your Tax Forms as you guide.
When do I need to file my taxes by?
As per the IRS, the filing deadline is April 18 for most taxpayers. In addition, if you are looking to extend, you can follow this link for more information.
How can I access my IRS Tax Forms?
Swan makes these available in two ways:
- Physical Copy via Mail: On Thursday, February 9th, 2023 our custodian mailed a physical copy to your address on file. If you have since moved since opening your account, you will still be able to download the Digital copy (below).
- Digital Download: You can download your Tax Forms directly from the Swan Dashboard. You can find them by logging into your Account, clicking on the Settings button at the top of your Dashboard, and then clicking on Export Account Data.
How do I file my taxes?
You will need to submit IRS Form 8949 as part of your tax filing.
In order to compile the information needed to fill this form, it is important to find a CPA and/or Tax Software that can help you understand the requirements for your specific situation. If you are unclear about where to begin, we recommend reading Turbotax's 101 Article.
What data does Swan provide me to help file?
There are three types of reports that Swan provides in order to produce Form 8949:
| Report | Description | Location |
| Cointracker.io Tax CSV |
You can upload this CSV directly into Cointracker.io. If you prefer a different vendor, you can likely use this export for other partners as well. |
Two locations: 1) At the bottom of your Dashboard "Tax CSV" 2) Settings -> Export Account Data -> Swan Tax Report |
| Swan Deposits and Purchases CSV | This report is similar to the above report, with two differences: 1) Rather than only containing USD Deposits that had a fee taken on deposit, it contains ALL deposit information. 2) Fees are shown as a unique line item CPAs may prefer this reporting structure or the above Tax CSV. We recommend that you send them both. |
Two locations: 1) At the bottom of your Dashboard "Deposits & Purchases CSV" 2) Settings -> Export Account Data -> Deposits and Purchases |
| IRS Forms (See below) | Depending on your Account type and use case, you may receive up to two different IRS Forms |
You can access these in two ways: 1) Digital Download:You will soon be able to download your Tax Forms directly from the Swan Dashboard. You can find them by logging into your Account, clicking on the Settings button at the top of your Dashboard, and then clicking on Export Account Data.
|
What IRS forms should I expect for my situation?
Depending on your activity on Swan and your account type, you may receive up to two different forms. If you did not participate in any of the below activities, you won't receive any forms.
| Account Type | Form | Description |
|---|---|---|
|
IRA
|
1099-R
|
Form 1099-R is used to report the distribution of retirement funds.
|
|
IRA
|
5498
|
If you are claiming a deduction for your IRA contributions, you can reference Form 5498 to find your total contributions for the tax year.
|
|
Non-IRA
|
1099-B
|
Form 1099-B is used to report gains or losses from sales of Bitcoin. This would include any sales resulting form a Tax Loss Harvest.
|
|
Non-IRA
|
1099-MISC
|
1099-MISC is used if you received $600 or more worth of Swan Force Referral payments in the tax year. |
How should I use 1099-B to submit my taxes?
Your 1099-B will disclose the proceeds from any Bitcoin sales through Swan. However, this is only part of the picture.
To file your taxes, you will need to understand your taxable gains or losses. In terms of understanding your taxable gain or loss, we recommend that you consult with a tax professional to determine your cost basis. If you have experience dealing with your own taxes previously, you may be able to do this yourself.
When it comes to determining your cost basis, there are two important things to consider:
- Our custodian did not submit cost-basis data to the IRS (Box 12 on the 1099-B). This is standard practice for "Crypto" exchanges, as crypto (including Bitcoin) can uniquely be transferred in/out of the exchange to a different provider, which makes the cost basis impossible to track. This problem does not exist in the equities world, for example.
- The 2023 1099-B uses a simple FIFO (First in, first out) accounting methodology to determine your cost bases and subsequent gains/losses. Most people that tax-loss-harvest, for example, want to use HIFO (Highest in, first out) to maximize their losses (i.e. sell their Bitcoin with the highest cost basis). For that reason, the data contained on the 1099-B may not match your desired methodology.
Therefore, you will likely want to consult with a CPA or Tax Professional to determine your cost basis in the following situations:
- You don't want to use FIFO ("First in, first out") as your accounting methodology. For example, most people that tax-loss-harvest wish to use HIFO ("Highest in, first out") in order to maximize their capital losses
- You transferred Bitcoin into Swan from self-custody or a different exchange/platform. For example, you bought Bitcoin with Swan, withdrew to self-custody and redeposited Bitcoin. In this example, our custodian cannot know that it is the same Bitcoin.
- You bought and/or sold Bitcoin from someone other than Swan. In this case, you will also receive a 1099 Form from the other platform(s), for which the data will be siloed from your Swan data. In this case, you should take the transaction history reporting from each platform that you used, and use tax software and/or a CPA to produce a single, consolidated 8949.
In these scenarios, the best thing to use the Swan Tax CSV to produce Form 8949. To do this, you should either work with a CPA and/or use special tax software like Koinly.io or Cointracker.io. They can help you aggregate the appropriate data, choose the accounting methodology that is best for you, and submit your Form 8949 accurately.