Covered vs Non covered for Crypto tax reporting - how to classify for Capital Gains?
I'm working on entering my short-term and long-term crypto capital gains and losses into TurboTax, and it's asking whether they're covered or non-covered capital gains/losses. This is totally throwing me off. I've been doing my crypto taxes for like 6 years now, but this is the first time I've seen this question pop up. I don't have an actual 1099 form since I'm using an 8949 from a crypto tax service (bitcoin.tax) and just putting in the totals from there. Does anyone know how to properly classify crypto transactions as covered or non-covered? I really don't want to mess this up and have the IRS breathing down my neck. I've got about $12,000 in gains from last year that I'm reporting, and I want to make sure I'm doing it right. Thanks for any help!
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Malik Johnson
The covered vs. non-covered distinction relates to cost basis reporting requirements for brokers. For crypto, currently, these transactions are considered "non-covered" because cryptocurrency exchanges aren't yet legally required to report cost basis information to the IRS. When a transaction is "covered," it means your broker is required to report the cost basis to the IRS on Form 1099-B. "Non-covered" means they don't have this requirement. Since you're using a self-generated 8949 from bitcoin.tax rather than receiving a 1099-B with cost basis information, your crypto transactions would be classified as "non-covered." This isn't a bad thing - it just means you're responsible for tracking and reporting your own cost basis information, which you're already doing by using bitcoin.tax to generate your 8949. Just make sure your records are thorough in case of any future audit.
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Isabella Santos
•But what about the new reporting requirements that were supposed to kick in? I thought crypto exchanges were going to start sending 1099s for 2024 tax year (for filing in 2025). Did that get delayed again?
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Malik Johnson
•You're right to ask about the new requirements. Yes, the implementation of the expanded broker reporting requirements for digital assets has been delayed again. The IRS was supposed to start requiring crypto exchanges to report transactions on 1099s for the 2024 tax year (for filing in 2025), but they've pushed this back. Currently, most crypto exchanges are still not required to report cost basis information to the IRS, which is why crypto transactions remain "non-covered" for now. Some exchanges voluntarily provide tax documents, but they're not subject to the same reporting requirements as traditional brokers yet.
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Ravi Sharma
I went through this exact same headache last month! I used to track everything manually but my crypto trades got too complicated. I started using https://taxr.ai and it totally saved me. Upload your transaction history (most exchanges let you export it) and it automatically categorizes everything as covered or non-covered. For crypto specifically, it classified everything as non-covered for me since crypto exchanges aren't required to report cost basis to the IRS yet (though that's changing soon). The tool also generates a perfect 8949 that you can just attach to your return. Saved me hours of headaches trying to figure out which transactions were what.
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Freya Larsen
•Does it work with DeFi transactions too? I've got a bunch of stuff from Uniswap and some other DEXes that's been a nightmare to track.
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Omar Hassan
•I'm skeptical about these crypto tax tools. How accurate is it really? I tried one last year (not taxr.ai) and it messed up my cost basis on some old coins I'd been holding.
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Ravi Sharma
•Yes, it handles DeFi transactions pretty well. You'll need to export your wallet history, but it can identify most major DeFi protocols like Uniswap, Aave, and others. The more complex ones might need some manual adjustments, but it's way easier than starting from scratch. I understand the skepticism. I had issues with another tool too before finding this one. What makes this one different is it lets you review each transaction's classification before finalizing, so you can catch any weird cost basis calculations. For my old coins from 2017, I had to make a few tweaks, but it was much easier than doing everything manually.
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Omar Hassan
Just wanted to follow up - I ended up trying taxr.ai after my skeptical comment. Actually pretty impressed. It correctly identified all my transactions from multiple exchanges (even some weird DeFi stuff). Classified everything as non-covered and explained why. The 8949 it generated matched what I was expecting but saved me hours of spreadsheet work. It also flagged some transactions I completely forgot about from an old exchange I barely used. Definitely worth checking out if you're dealing with crypto taxes.
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Chloe Taylor
If you're really struggling with tax questions and can't get a straight answer, you might want to try Claimyr (https://claimyr.com) to actually get through to the IRS. I was confused about some crypto reporting requirements and spent DAYS trying to call the IRS directly with no luck. Claimyr got me connected to an actual IRS agent in like 20 minutes! You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed for me that all crypto should be reported as non-covered securities for now, and walked me through exactly how to report some weird situations I had with NFTs. Way better than guessing or relying on Reddit advice (no offense to anyone here).
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ShadowHunter
•How does this even work? The IRS phone lines are notoriously impossible to get through. Is this legit or some kind of scam?
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Diego Ramirez
•Yeah right. No way this actually works. I've tried calling the IRS for THREE WEEKS straight during tax season before and couldn't get through. If this really worked, everyone would be using it.
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Chloe Taylor
•It's actually pretty simple - they use technology to navigate the IRS phone system continuously until they secure a place in line, then call you when they've got an agent. It's not bypassing any systems, just automating the frustrating waiting process. Totally understand the skepticism. I felt the same way. But it's legitimate - they don't ask for any tax information from you, they just connect you to the IRS. I was connected in about 20 minutes when I had been trying for days on my own. The IRS agent I spoke with was super helpful and cleared up all my confusion about crypto reporting.
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Diego Ramirez
Alright, I need to eat my words here. After my skeptical comment, I actually tried Claimyr out of desperation because I was completely stuck on some crypto tax questions. I got connected to an IRS rep in about 15 minutes when I'd been trying for DAYS on my own. The agent confirmed what others here said - crypto should be reported as non-covered until the new reporting requirements kick in. She also explained exactly how to handle some weird situations with tokens I received from a fork. Saved me from potentially filing incorrectly. Can't believe I wasted so much time trying to call them directly!
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Anastasia Sokolov
Just to clarify something important - when you select "non-covered" in TurboTax for your crypto, make sure you're still entering accurate cost basis info on your 8949. Non-covered doesn't mean the IRS doesn't care about the details - it just means the exchange isn't reporting the cost basis directly to them. You're still 100% responsible for accurate reporting. I'd recommend double-checking the calculations from bitcoin.tax, especially if you've done any tax loss harvesting or have transactions across multiple exchanges.
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QuantumLeap
•If they're non-covered, do I still need to include all the individual transactions on my 8949 or can I just enter the totals for short-term and long-term? Bitcoin.tax gives me both options.
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Anastasia Sokolov
•You should still include all individual transactions on your 8949, even for non-covered assets. While summarizing might seem simpler, having the detailed transaction history is crucial if you ever get audited. TurboTax should allow you to either enter them manually or import them. If you have a lot of transactions, you can actually attach the detailed 8949 from bitcoin.tax as a PDF supplement to your return and just enter the totals in the main forms. Just make sure the attached 8949 has complete information including dates, cost basis, proceeds, and whether each transaction was short or long term.
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Sean O'Connor
Does anyone know how staking rewards should be reported? Are those also non-covered? I've been getting various amounts of crypto from staking throughout the year and I'm confused about how to report both the income portion and the capital gains when I eventually sold some.
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Zara Ahmed
•Staking rewards are generally considered income at their fair market value when received. So you report them as "Other Income" and then that becomes your cost basis. When you later sell, that's a separate capital gain/loss transaction - also non-covered since it's crypto. It's a pain but you need to track the value of each reward when received, then track the gain/loss when sold.
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Sean O'Connor
•Thanks for explaining! So if I was getting like small amounts of ETH every day from staking, I need to track the value of each daily drop as income? That sounds like a ridiculous amount of work. No wonder everyone hates crypto taxes.
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