Crypto Tax & Digital Asset Reporting

Yield farming and liquid staking raise hard characterization questions. Are your rewards ordinary income when received, or can tax be deferred until sale? The difference in liability can be large. We model the 'zero-cost basis' rules and manage the self-employment tax questions that professional validators face.

We also document the fair market value (FMV) behind each reward so the numbers hold up later. That matters in a volatile market: without it, you can end up paying tax on phantom gains from tokens that lost value shortly after the airdrop or reward hit your wallet.

Unlike traditional stocks, digital assets allow precise cost-basis tracking through Specific Identification. Using Highest-In-First-Out (HIFO) accounting, we sell the high-basis units first to offset gains, which usually produces a much lower reported liability than the standard FIFO method.

We keep the per-unit basis records that make this method defensible. If the IRS asks for your basis calculations, we hand over a wallet-to-wallet audit trail showing exactly which unit was sold and why the chosen basis is legally accurate.

The IRS often treats NFT sales as 'collectibles', which can carry a higher maximum capital gains rate (28%). We characterize your collection transactions to identify which assets qualify for standard capital gains rates instead. We also watch for 'constructive sales' under IRC § 1259, so a hedging position doesn't trigger a tax event before you actually sell.

For creators and artists, we handle the self-employment tax reporting on royalties and secondary sales, and make sure business expenses are fully deducted against that income.