Top ten questions to ask a tax expert about your cryptocurrency investments

Before you pick a preparer for a crypto year, it helps to know what you are actually testing for. The IRS has treated virtual currency as property since Notice 2014-21, and the reporting rules have only tightened since. Someone who files a stack of crypto returns each spring knows that cold. Someone who files one or two a year, however sharp on ordinary returns, tends to hedge. The questions below sort the two apart in a single conversation.

Is crypto actually tax-free?

No, and this is the one answer that should come back instantly. Since Notice 2014-21 the IRS has treated crypto as property. Selling it, trading one coin for another, or spending it on goods all count as disposals that can produce a gain or loss. Getting paid in crypto, mining, staking rewards, and most airdrops are ordinary income valued in dollars on the day you receive them. Anyone who tells you crypto is untaxed until you cash out to dollars has it wrong, and that answer alone should end the interview.

What records will you need from me?

Ask this before you start pulling files, and listen for specifics. A complete set usually means every exchange's full transaction export, your wallet addresses and on-chain history, dollar values at acquisition and disposal, and records of transfers between your own wallets so those are not mistaken for sales. A preparer who can only work from a single tax form cannot rebuild your cost basis, and without basis your gains look larger than they are. The good ones ask for raw data, not summaries.

How do you handle a year with incomplete records?

This is where experience shows. Exchanges shut down, CSV exports go missing, and early wallets get lost or forgotten. Ask how they reconstruct basis when the trail has gaps, whether that means block explorers, historical price data, or a documented method they can defend if the return is questioned. A preparer who says every transaction must be perfect or the return cannot be filed has not worked through many real crypto histories.

Do crypto-to-crypto trades count if I never touched dollars?

Yes, and the answer should be immediate. Trading ETH for SOL is a disposal of the ETH at its fair market value that day, and any gain since you acquired the ETH is taxable. The like-kind exchange rule that some people still cite was limited to real estate starting in 2018, and the IRS has said it never applied to crypto in the first place. If a preparer floats swapping coins as a way to defer tax, keep looking.

How do losses actually help me?

Capital losses offset capital gains first. Up to $3,000 of net loss can then offset ordinary income in a year, and anything beyond that carries forward to future years. Worthless or abandoned tokens are a separate conversation, and the treatment is stricter than most people expect, so ask how they would document that a token is truly gone. As of 2026 the wash-sale rule that blocks loss harvesting on stocks does not apply to crypto, which affects year-end planning, though that could change if Congress acts.

How do you treat staking, mining, airdrops, and rewards?

These are income when you receive them, valued in dollars at that moment, and that value becomes your basis when you later sell. A capable preparer walks through each type without pausing. Staking in particular has been contested, so you want someone working from the current IRS position rather than a blog post from a few years back. Getting the income value right also protects you later, because an inflated basis today means an inflated gain when you sell.

What happens with DeFi, lending, and borrowing?

Borrowing dollars against crypto you keep is generally not a taxable event. Getting liquidated is. Lending your coins, providing liquidity, wrapping tokens, and earning protocol rewards can each trigger income or a disposal depending on how the transaction is built. If your year included any of this, describe one real transaction and ask the preparer to walk through how they would treat it. A specific answer is reassuring. A vague one is a warning sign.

How likely is it the IRS already knows?

Assume it knows something. The digital asset question sits near the top of Form 1040, and you sign the return under penalties of perjury. Exchanges now issue Form 1099-DA reporting your activity, and the IRS has used John Doe summonses to pull user records from major platforms. A straight answer here covers the odds of a mismatch and how to fix prior years cleanly, rather than a suggestion to sit tight and hope nothing surfaces.

If I under-reported in past years, what are my options?

A solid answer covers amended returns, how far back to go, the penalties you might face, and when a voluntary disclosure is worth considering. What you do not want is someone who waves off the risk, or who pushes you straight to the most aggressive fix without weighing it. Ask directly how they have handled back-year cleanup before, because prior-year exposure is where an experienced preparer saves you the most.

How much crypto work do you actually do?

The most useful question is the plainest. Ask how many crypto returns they file in a season, which chains and products they see most, and what software they run transactions through. Someone who does this constantly answers with specifics. Someone who files a couple a year will generalize. For a messy multi-exchange or DeFi year, that gap is the whole difference between a return that holds up and one that invites a second look.

What a good conversation tells you

You are not checking whether a preparer knows every answer from memory. You are checking whether they know where the rules live, say plainly what is still unsettled, and have handled histories like yours before. Ten questions is enough to see all three. If the answers are specific, current, and honest about the gray areas, you have found the right person for the work.