Frequently Asked Questions
Have questions about cryptocurrency taxes, working with a CPA, or how Monaco CPA can help? Find answers below organized by topic. If you don't see your question, book a free consultation and I'll be happy to discuss your specific situation.
Cryptocurrency Tax Questions
Do I need to report crypto if I didn't sell for USD?
Yes. The IRS requires reporting of all cryptocurrency transactions, including crypto-to-crypto trades. Swapping Bitcoin for Ethereum or trading tokens on Uniswap are taxable events, even if you never converted to dollars. The IRS treats cryptocurrency as property, so every disposal triggers a gain or loss calculation.
Learn more about crypto tax basics →
What is the wallet-by-wallet tracking requirement?
Under Revenue Procedure 2024-28, effective January 1, 2025, the IRS requires taxpayers to track cost basis on a wallet-by-wallet or account-by-account basis. You can no longer aggregate all holdings of a cryptocurrency across multiple wallets to calculate a "universal" average cost. If you sell Bitcoin from Coinbase, you must use the basis of Bitcoin in that specific Coinbase account—not Bitcoin held elsewhere.
Read the complete wallet-by-wallet guide →
What is Form 1099-DA and when does it take effect?
Form 1099-DA is the new IRS form for cryptocurrency broker reporting. The timeline is:
-
2025: Centralized exchanges began tracking transactions
-
Early 2026: Taxpayers receive first Form 1099-DA (gross proceeds only)
-
2027: Cost basis reporting begins on 1099-DA
Note: The DeFi broker reporting rule was repealed in April 2025, so decentralized protocols are not required to issue 1099-DA forms.
Read the Form 1099-DA explainer →
How are staking rewards taxed?
Under Revenue Ruling 2023-14, staking rewards are taxable as ordinary income at fair market value when you gain "dominion and control" over the tokens—not necessarily when they're generated by the protocol. If your rewards are subject to a lock-up or unbonding period, income recognition may be deferred until you can actually access them.
Are airdrops taxable?
Yes. Per IRS Revenue Ruling 2019-24, tokens received from airdrops are taxable as ordinary income at fair market value when you gain dominion and control over them. This fair market value becomes your cost basis for future sales.
How are NFTs taxed?
NFT taxation has unique considerations. Per IRS Notice 2023-27, certain NFTs may be classified as "collectibles" based on a "look-through" analysis of the underlying asset. Collectibles are subject to a maximum 28% long-term capital gains rate—higher than the standard 20% cap. NFTs representing digital art, physical art ownership, or rare collectibles may trigger this higher rate.
Can I still do tax-loss harvesting with crypto?
Yes, but with caution. While the statutory wash sale rule (IRC §1091) does not technically apply to cryptocurrency, the IRS may challenge transactions under the Economic Substance Doctrine (IRC §7701(o)) if they lack meaningful economic purpose beyond tax savings. I recommend either:
-
Option A: Sell the losing asset and immediately purchase a different but correlated asset (e.g., sell BTC, buy ETH)
-
Option B: Wait at least 30 days before repurchasing the identical asset
What if I lost access to my crypto or an exchange went bankrupt?
I help reconstruct transaction history from blockchain explorers and available records. For genuinely lost assets, I document the loss for potential abandonment treatment or casualty deduction. Each situation requires individual analysis—schedule a consultation to discuss your specific circumstances.
New Jersey Tax Questions
How does New Jersey tax crypto differently from federal?
New Jersey has several key differences that catch investors off guard:
-
No preferential rate: NJ taxes capital gains as ordinary income at rates up to 10.75%—there's no long-term capital gains discount
-
No $3,000 offset: Unlike federal rules, NJ does not allow capital losses to offset ordinary income
-
No carryforward: NJ does not permit capital loss carryforwards to future years
-
Losses only offset gains: Capital losses can only offset capital gains in the same tax year
This means a federal tax-loss harvesting strategy may provide significantly less benefit on your NJ return.
Read the full NJ crypto tax guide →
Do I need to file a NJ state return if I work remotely for a company in another state?
Generally, yes. New Jersey residents are taxed on worldwide income regardless of where it's earned. However, you may be entitled to a credit for taxes paid to other states. Multi-state tax situations can be complex—I help clients navigate these situations to ensure proper filing in all required states while avoiding double taxation.
IRS Compliance Questions
I received an IRS letter about crypto. What should I do?
Don't panic, but don't ignore it. The IRS sends several types of crypto-related notices:
-
CP2000: Proposed changes based on unreported income
-
Letter 6173: Request for information about crypto transactions
-
Letter 6174: Educational notice about reporting requirements
-
Letter 6174-A: Warning about potential non-compliance
I help clients respond to all types of IRS notices, prepare documentation, and represent you before the IRS if needed.
Learn about IRS crypto letters →
What if I didn't report crypto in prior years?
I assist with amending prior returns and voluntary disclosure programs. Coming forward proactively typically results in lower penalties than waiting for IRS discovery. The IRS offers several options depending on your situation, and I've helped many clients achieve full compliance with minimized penalties.
Schedule a confidential consultation →
Does the IRS know about my crypto?
Increasingly, yes. Exchanges are required to file Form 1099s for certain transactions and will begin issuing Form 1099-DA. The IRS also uses blockchain analytics tools and has obtained customer records from major exchanges through "John Doe" summonses. Additionally, every federal tax return now includes a digital assets question that must be answered truthfully.
Working with Monaco CPA
How does working with you differ from using crypto tax software?
Crypto tax software is a tool—I provide expertise. Key differences:
-
Error detection: Software can't catch its own mistakes. I review calculations and identify issues software misses
-
Strategy: Software calculates taxes; I plan to minimize them legally
-
Compliance judgment: Complex situations (DeFi, lost wallets, forks) require professional interpretation
-
Audit support: If the IRS questions your return, software can't represent you—I can
-
State taxes: Most software focuses on federal; I handle NJ's unique rules
For simple situations, software may suffice. For active traders, DeFi users, or anyone with complex activity, professional guidance pays for itself.
What's included in a crypto tax engagement?
My typical crypto tax engagement includes:
-
Data Collection: Gathering transactions from all exchanges, wallets, and DeFi protocols
-
Transaction Analysis: Categorizing every transaction and calculating cost basis
-
Optimization: Applying tax-loss harvesting, selecting optimal accounting methods
-
Form Preparation: Form 8949, Schedule D, Schedule 1, Schedule C (if applicable)
-
Documentation: Complete records supporting every calculation
-
Review Call: Walking you through the return before filing
-
Ongoing Support: Answering questions throughout the year
Do you work with clients outside New Jersey?
Absolutely. While I'm based in Livingston, NJ, I work with clients nationwide. My practice is fully virtual—we communicate via secure video calls, and all documents are exchanged through my encrypted TaxDome portal. I've helped crypto investors in all 50 states.
How do I get started?
-
Book a free consultation — 15-30 minutes to discuss your situation
-
Get a custom quote — Based on your transaction volume and complexity
-
Onboarding — I set you up on the secure client portal
-
Upload documents — Exchange CSVs, wallet addresses, prior returns
-
Relax — I handle the rest
How quickly do you respond to questions?
I guarantee a response to emails within 24 hours during business days. Most clients hear back same-day. You'll never be left waiting for critical financial answers—that's part of the Monaco CPA difference.
What are your fees?
Fees depend on transaction volume and complexity:
-
Simple returns (under 100 transactions): Starting rates
-
Active traders (100-1,000+ transactions): Mid-tier pricing
-
Complex situations (DeFi, multiple wallets, prior year amendments): Custom quoted
Bookkeeping services start at $299/month. All engagements begin with a free discovery call where I provide a specific quote for your situation.
Business & Tax Planning Questions
Should my business be an LLC or S-Corp?
This depends on your specific situation, including income level, self-employment tax exposure, and growth plans. Generally:
-
LLC (taxed as sole prop): Simpler, lower compliance costs, all income subject to SE tax
-
S-Corp: More complex, but can reduce SE tax by splitting income between salary and distributions
For crypto mining operations or active trading businesses, entity structure can significantly impact tax liability. I analyze your situation and model both options before making recommendations.
How much should I pay myself as an S-Corp owner?
The IRS requires S-Corp owners who perform services to take "reasonable compensation" as W-2 wages before taking distributions. What's "reasonable" depends on your industry, role, hours worked, and company revenue. Paying too little triggers IRS scrutiny; paying too much wastes the S-Corp tax benefit. I help clients find the right balance.
What records should I keep for crypto?
Maintain records of:
-
All transactions: Date, time, amounts, assets involved
-
Fair market value: Price at time of each transaction
-
Wallet addresses: Which wallets hold which assets
-
Exchange records: Complete transaction history exports
-
Cost basis documentation: How you acquired each asset
-
Transfer records: Movements between your own wallets
Keep these records for at least 7 years (longer if you have carryforward losses).
Still Have Questions?
I'm happy to discuss your specific situation. Whether you have questions about crypto taxes, business structure, or general tax planning, I provide clear, jargon-free answers.