Home Questions Reporting a crypto sale before the deadline
Friday • Asked by a Dallas tech employee
I sold a chunk of my Bitcoin in February. What do I need to do before April?
A full answer from Michael R. Cowell, CPA, EA, CFE. The kind of question that comes up on a first call, written out the way I would explain it.
The short answer
Two things before April. Gather every transaction, not just the sale, including the dates and cost basis of when you acquired the crypto, because that determines your gain and whether it is short or long term. And check whether the sale created an estimated tax shortfall, because a large early-year gain can mean a payment is due before April to avoid an underpayment penalty.
Crypto is property, not currency
The tax system treats cryptocurrency as property. Selling it, swapping one coin for another, or using it to buy something are all taxable dispositions. Your gain or loss on each is the proceeds minus your cost basis, the amount you originally paid including fees. A February sale of Bitcoin is a reportable event for this tax year.
Short term and long term are taxed very differently
Holding period drives the rate. Crypto held one year or less before the sale produces a short-term gain, taxed at ordinary income rates. Crypto held more than a year produces a long-term gain, taxed at the lower capital gains rates. On a large position, that difference can be a substantial amount of tax, which is why the acquisition dates matter as much as the sale date.
Cost basis is your responsibility
Exchanges report sale proceeds, and broker reporting for digital assets has been expanding. But basis is frequently incomplete, especially if the coins moved between wallets or exchanges before the sale. If you only report what an exchange shows, you can end up taxed on proceeds with no basis subtracted. Reconstructing the full acquisition history is the part that takes time, so it is the part to start now.
The estimated-tax trap
Federal tax is pay-as-you-go. Wages have withholding; a crypto gain does not. A large gain realized in February with nothing withheld against it can mean you owe an estimated tax payment, and the first installment is due in April. Miss it and the result is an underpayment penalty even if you pay the full balance later. There are safe-harbor thresholds, generally based on paying a set percentage of either this year or last year tax, that tell you how much needs to be paid in to avoid the penalty.
What to do
- Export the full transaction history from every wallet and exchange you used.
- Reconcile cost basis and acquisition dates for the coins you sold.
- Estimate the gain, splitting short-term from long-term, and the tax on it.
- Make a Q1 estimated payment by the April deadline if a safe harbor is not already met.
This is general guidance, not advice for your specific situation, and it is current as of when it was written. Tax law changes and the right answer depends on your full picture. That is what the first call is for.
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