Name: OpenAccountants MCP Server
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Mandatory yes/no question on every return — Every individual return (Forms 1040, 1040-SR, 1040-NR, 1041, 1065, 1120, 1120-S) carries a digital asset question that must be answered 'Yes' or 'No'; it cannot be left blank. The 2025 wording asks: 'At any time during 2025, did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?' (2025 Instructions for Form 1040 (i1040gi); IRS 'Digital assets' page)
What triggers a 'Yes' answer — Check 'Yes' if during the year you: received digital assets as payment for property/services; received them as a reward or award; received new digital assets from mining, staking, or similar activities; received them from a hard fork; disposed of a digital asset in exchange for property/services; sold a digital asset; exchanged or traded one digital asset for another; or otherwise disposed of a digital asset (or any financial interest in one). (IRS, 'Determine how to answer the digital asset question')
Activities that do NOT require 'Yes' — A 'No' answer is allowed if the only activity was: holding digital assets; transferring assets between wallets or accounts the taxpayer owns or controls; or purchasing digital assets with U.S. or other real currency (including via platforms such as PayPal or Venmo). (IRS, 'Determine how to answer the digital asset question')
Where crypto sales/dispositions are reported — Sales, exchanges, and other dispositions of digital assets held as capital assets are reported on Form 8949 (Sales and Other Dispositions of Capital Assets), with totals carried to Schedule D (Form 1040). Each disposition is listed separately. (2025 Instructions for Form 8949; 2025 Instructions for Schedule D (Form 1040))
Required description detail for a digital asset (column (a)) — For a digital asset, column (a) must include the full name or an abbreviated symbol of the digital asset and the exact units sold or disposed of in the transaction, and include the sale transaction ID number, if available. Complete the date acquired, date sold, proceeds, and cost/other basis columns as for any capital asset. (2025 Instructions for Form 8949)
Short-term digital asset boxes G / H / I — Beginning in 2025, Form 8949 has dedicated short-term digital asset boxes. Box G = short-term digital asset transactions reported on Form 1099-DA (or substitute statement) WITH an amount shown for cost or other basis. Box H = reported on Form 1099-DA WITHOUT a basis amount (or showing basis not reported to the IRS). Box I = digital asset transactions for which no Form 1099-DA was received. Do not use box C for digital asset transactions — use box I. (2025 Instructions for Form 8949)
Long-term digital asset boxes J / K / L — Box J = long-term digital asset transactions reported on Form 1099-DA (or substitute statement) WITH basis reported to the IRS. Box K = reported on Form 1099-DA WITHOUT a basis amount (basis not reported to the IRS). Box L = digital asset transactions for which no Form 1099-DA was received. Do not use box F for digital asset transactions — use box L. (2025 Instructions for Form 8949)
Schedule 1 — other income (non-business) — Crypto income received outside a trade or business (e.g., staking/mining rewards by a hobbyist, hard-fork receipts, rewards/awards) is reported as ordinary income, generally on Schedule 1 (Form 1040), line 8v ('Digital assets received as a reward, award, or payment for property or services') or line 8z, with no self-employment tax. (2025 Instructions for Schedule 1 (Form 1040); IRS FAQs on digital asset transactions)
Schedule C — business income and self-employment tax — Where digital asset activity (e.g., a trade or business of mining, or receiving crypto as payment for services rendered as an independent contractor) rises to the level of a trade or business, the income is reported on Schedule C (Form 1040) and is subject to self-employment tax (Schedule SE). (IRS FAQs on digital asset transactions; 2025 Instructions for Schedule C (Form 1040))
Statutory authority and final regulations — Broker reporting of digital asset dispositions is authorized under IRC § 6045 (returns of brokers), as amended by the Infrastructure Investment and Jobs Act. Final regulations were issued as TD 10000 (89 Fed. Reg. 56480, July 9, 2024), requiring reporting on new Form 1099-DA, 'Digital Asset Proceeds From Broker Transactions.' (IRC § 6045; TD 10000, 89 Fed. Reg. 56480 (July 9, 2024))
Gross proceeds reporting start date — Custodial brokers must report GROSS PROCEEDS on Form 1099-DA for sales of digital assets effected on or after January 1, 2025. These 2025 transactions are first reported on Forms 1099-DA filed/furnished in early 2026. (PHASE-IN — gross proceeds only for 2025; basis not yet required) (TD 10000; IRS 'Final regulations and related IRS guidance for reporting by brokers on sales and exchanges of digital assets')
Cost basis reporting start date — COST (adjusted) BASIS reporting on Form 1099-DA begins for covered digital assets acquired and sold on or after January 1, 2026 (first reported on Forms 1099-DA filed/furnished in early 2027). A covered security is a digital asset acquired after 2025 in a custodial account; assets acquired before 2026 are noncovered and basis is not required (may be voluntarily reported). Most 2025 Forms 1099-DA will therefore show gross proceeds only, without basis. (PHASE-IN — basis reporting begins for 2026 acquisitions/sales, first reported in 2027) (TD 10000; IRC § 6045(g)(3) (covered security); 2026 Instructions for Form 1099-DA)
Who must file (custodial brokers) — The TD 10000 final regulations apply to custodial brokers — persons who, in the ordinary course of a trade or business, stand ready to effect sales of digital assets for customers and take possession/custody (e.g., centralized digital asset trading platforms, certain hosted wallet providers, and digital asset payment processors). (TD 10000; Treas. Reg. § 1.6045-1)
DeFi / non-custodial 'front-end' broker rule — REPEALED — Separate final regulations (TD 10021, 89 Fed. Reg. 106928, Dec. 30, 2024) would have treated certain non-custodial / DeFi 'trading front-end' participants as brokers required to report gross proceeds. That rule was disapproved under the Congressional Review Act; the joint resolution was signed into law as Public Law 119-5 on April 10, 2025, so the DeFi-broker rule has no force or effect, and Treasury reverted the § 6045 regulatory text to its prior form. DeFi front-ends are NOT required to file Form 1099-DA. (REPEALED — DeFi/non-custodial broker rule struck down by CRA (Pub. L. 119-5); no force or effect) (TD 10021, 89 Fed. Reg. 106928 (Dec. 30, 2024); Pub. L. 119-5 (Apr. 10, 2025); 90 Fed. Reg. 31136 (July 11, 2025) removal of regulations)
Recipient statement furnishing deadline (2025 tax year) — Brokers must furnish the payee statement reflecting Form 1099-DA information to customers by February 17, 2026 for the 2025 tax year (the standard February 15 due date for certain statements falls on a weekend/holiday). Most 2025 statements will not include cost basis. (IRS, 'Tax professionals can prepare now to assist their clients with reporting proceeds from certain digital asset transactions')
$10,000 digital-asset receipt reporting by a trade or business — $10,000 USD (The Infrastructure Investment and Jobs Act amended IRC § 6050I(d) to add digital assets to the definition of 'cash,' which would require a person engaged in a trade or business to file Form 8300 (Report of Cash Payments Over $10,000) upon receiving more than $10,000 in digital assets in a transaction (or related transactions). (DELAYED — see Announcement 2024-4; digital assets not yet included for the $10,000 test)) (IRC § 6050I; Instructions for Form 8300)
Enforcement delay — Announcement 2024-4 — Per Announcement 2024-4, until the IRS issues final regulations under § 6050I to implement the Infrastructure Act, digital assets are NOT required to be included when determining whether cash received in a single transaction (or related transactions) exceeds the $10,000 reporting threshold. Form 8300 reporting of digital-asset receipts is therefore not currently required. (DELAYED — transitional relief; digital-asset Form 8300 reporting suspended pending final regulations) (Announcement 2024-4, 2024-6 I.R.B. 715)
FBAR aggregate threshold — $10,000 USD (aggregate maximum balance of all foreign financial accounts at any one point during the calendar year) (31 CFR §1010.350)
Crypto-only foreign account — currently NOT FBAR-reportable — Under FinCEN Notice 2020-2 (Dec. 30, 2020), a foreign account holding ONLY virtual currency is not currently reportable on the FBAR. FinCEN announced its intention to propose amending the regulations to include virtual currency as a reportable account type, but as of the 2025 tax year that amendment has NOT been finalized, so a crypto-only foreign account remains outside the current FBAR rules. (UNCERTAIN / PROPOSED — FinCEN intends to amend regs to require reporting; not finalized as of TY2025) (FinCEN Notice 2020-2, 'Report of Foreign Bank and Financial Accounts (FBAR) Filing Requirement for Virtual Currency')
Mixed accounts (crypto plus reportable assets) — Caution: a foreign account holding virtual currency together with other reportable assets (e.g., fiat currency, securities) is a foreign financial account that can be FBAR-reportable under existing rules once the $10,000 aggregate threshold is met. The Notice 2020-2 exception applies only to accounts holding solely virtual currency. (UNCERTAIN — fact-specific; verify the account contents and broader FBAR account-type analysis) (31 CFR § 1010.350; FinCEN Notice 2020-2 (by negative implication))
Form 8938 reporting thresholds — Living in U.S. — unmarried: more than $50,000 last day of year or more than $75,000 any time; MFJ: more than $100,000 year-end or more than $150,000 any time. Living abroad — unmarried: more than $200,000 year-end or more than $300,000 any time; MFJ: more than $400,000 year-end or more than $600,000 any time. USD (Specified individuals must file Form 8938 (under IRC § 6038D) if the aggregate value of specified foreign financial assets exceeds these thresholds.) (IRC § 6038D; IRS, 'Do I need to file Form 8938')
Is crypto on a foreign exchange a specified foreign financial asset? — The IRS has not issued final guidance definitively treating digital assets held through foreign exchanges or platforms as 'specified foreign financial assets' for Form 8938. Treasury proposed regulations (REG-109309-22, Aug. 2024) would treat certain digital assets as specified foreign financial assets, but they are not yet final. Many practitioners report such holdings conservatively; the IRS notes the underlying account or arrangement may be reportable if it otherwise meets the definition. Treat as an open area. (UNCERTAIN / PROPOSED — no final rule explicitly covering directly-held crypto; verify positions case-by-case) (IRC § 6038D; IRS 'Digital assets' page; proposed regs REG-109309-22)
Form 8283 for noncash crypto donations over $500 — $500 USD (A donation of digital assets is a noncash charitable contribution. If total claimed noncash contributions exceed $500, the donor must file Form 8283 (Noncash Charitable Contributions) with the return. Section B of Form 8283 (and donee signature) is required for an item or group of similar items claimed at more than $5,000.) (IRC § 170(f)(11); 2025 Instructions for Form 8283; Publication 526)
Qualified appraisal required when claimed value exceeds $5,000 — $5,000 USD (Per CCA 202302012, a taxpayer claiming a charitable deduction for donated cryptocurrency valued at more than $5,000 must obtain a qualified appraisal under IRC § 170(f)(11)(C). Cryptocurrency does NOT qualify for the 'readily ascertainable value' / publicly traded securities exception merely because it is listed on an exchange; failure to obtain a qualified appraisal can result in disallowance of the deduction. (Chief Counsel Advice — not precedential, but reflects IRS position)) (CCA 202302012 (Jan. 13, 2023); IRC § 170(f)(11)(C))
FMV deduction for long-term (>1 year) held crypto — Digital assets that are capital assets held for MORE than one year and donated to a qualified charity are generally deductible at fair market value (subject to AGI limits). Assets held one year or less are limited to the lesser of basis or FMV. (IRC § 170(e); Publication 526 (Charitable Contributions))
Form 709 required when a gift exceeds the annual exclusion — $18,000 per donee for 2024; $19,000 per donee for 2025 USD (A gift of digital assets to a single donee (other than a U.S.-citizen spouse) that exceeds the annual gift tax exclusion requires the donor to file Form 709 (U.S. Gift Tax Return), generally due April 15 of the following year. Filing may be required even if no gift tax is owed (offset by the lifetime exemption).) (IRC §§ 2503, 6019; 2025 Instructions for Form 709; Rev. Proc. 2024-40)
FMV substantiation and contemporaneous records — Taxpayers must keep records sufficient to establish the positions taken on their returns, including documentation of receipt, sale, exchange, or other disposition of digital assets and the fair market value (in U.S. dollars) of the digital assets at the time of each transaction. FMV is generally determined by converting at the exchange rate / spot price in a reasonable manner that is consistently applied. (IRC § 6001; IRS FAQs on digital asset transactions (Q on records); Notice 2014-21)
Specific identification — contemporaneous records — To use specific identification of which digital asset units were disposed of (rather than the default FIFO under Rev. Proc. 2024-28), the taxpayer must have records showing, at the time of the transaction, the unit's acquisition date and time, basis and FMV at acquisition, and the date, time, FMV, and proceeds at disposition. Absent adequate identifying records, the default ordering applies. Rev. Proc. 2024-28 requires wallet-by-wallet (per-account) basis tracking beginning January 1, 2025. (Wallet-by-wallet allocation/safe harbor under Rev. Proc. 2024-28 effective for 2025) (Treas. Reg. § 1.1012-1(j); Rev. Proc. 2024-28; IRS FAQs on digital asset transactions)

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