How to Reconcile Your Crypto Transactions for Tax Season (Step-by-Step)

Crypto Tax Reconciliation: 6 Steps to Report Your Crypto Transactions

Crypto tax reconciliation is essential for anyone who has bought, sold, or traded cryptocurrency. With increasing IRS scrutiny and new reporting requirements, accurately reconciling your crypto activity is no longer optional—it’s critical.

This step-by-step guide walks investors and businesses through how to reconcile cryptocurrency transactions and avoid common tax reporting mistakes.

Step 1 – Gather All Transaction Data

Start by compiling:

Buy/sell history from exchanges
Wallet transfers
Airdrops, forks, and staking rewards
Payments received in crypto

Use platforms like CoinTracking or Koinly to help consolidate data from multiple wallets and exchanges.

Step 2 – Determine Cost Basis and Fair Market Value

To calculate capital gains or losses, you need:

Cost basis: what you paid for the asset
Fair market value: price at the time of sale or trade

Use FIFO, LIFO, or Specific ID accounting methods based on your situation. Tracking this properly is key to crypto tax reconciliation.

Step 3 – Identify Taxable Events

Not all crypto activity is taxable, but these are:

Selling crypto for fiat
Trading one token for another
Spending crypto on goods/services

Examples of non-taxable events include:

Transferring between personal wallets
Holding crypto without activity

Step 4 – Calculate Gains and Losses

For each taxable event:

Subtract the cost basis from the sale price
Classify gains as short-term or long-term
Record losses for tax deduction opportunities

Proper crypto tax reconciliation ensures these values are accurate and defensible.

Step 5 – Reconcile Discrepancies and Gaps

Missing fees or untracked airdrops?

Go back to original transaction records
Use reasonable estimates if data is unavailable
Document all assumptions in case of an IRS audit

Creating an audit trail is essential.

Step 6 – Complete and File IRS Tax Forms

Most individuals will use:

Form 8949: to itemize crypto sales
Schedule D: for capital gains/losses
Schedule C or Form 1120 (for businesses)

Be sure to:

Attach supporting documentation
Keep backup copies of all forms and transaction logs

Need Help with Crypto Tax Reconciliation?

TrueScope Consulting offers end-to-end crypto tax reconciliation services. From cost basis tracking to IRS form preparation, we help ensure full compliance with evolving tax regulations.