What reporting requirement is associated with a sale of cryptocurrency?

When a taxpayer sells cryptocurrency, they are required to report the transaction on Form 8949. This form is specifically designed for reporting sales and exchanges of capital assets, which includes cryptocurrencies treated as property by the IRS.

The sale of cryptocurrency can potentially result in a capital gain or loss, depending on the difference between the sale price and the taxpayer's basis in the cryptocurrency (the amount initially paid for it). By completing Form 8949, the taxpayer provides detailed information about the transaction, such as the date acquired, date sold, proceeds from the sale, and cost basis, which is essential for accurately calculating capital gains or losses.

Form 8949 must be attached to the taxpayer's Schedule D when they file their annual tax return, ensuring that the IRS is made aware of the taxpayer’s gains or losses related to cryptocurrency transactions. This reporting requirement emphasizes the importance of recording and reporting each sale accurately to comply with tax obligations.

The other options are not applicable to reporting cryptocurrency sales: Form 8888 relates to allocating refunds, Schedule C is generally for self-employed income rather than capital transactions, and Form SS-4 is used for applying for an Employer Identification Number, which is unrelated to the reporting of capital gains or losses from cryptocurrency.