What records do I need to maintain regarding my transactions in virtual currency

You need to maintain records that are sufficient to establish the positions taken on your tax returns. Specifically, you should keep records documenting the following aspects of your virtual currency transactions:

1. Receipts: Documentation of when you received virtual currency, including the date and time of receipt, the fair market value at the time of receipt, and the nature of the transaction (e.g., payment for services, mining, airdrop).
2. Sales and Exchanges: Records of each sale or exchange of virtual currency, including:
   • The date and time each unit was sold, exchanged, or otherwise disposed of.
   • The fair market value of each unit at the time of the transaction.
   • The amount of money or the value of property received for each unit.
3. Other Dispositions: Documentation of any other dispositions of virtual currency, such as gifts or donations, including the date and time of the disposition and the fair market value at that time.
4. Fair Market Value: For each transaction, you need to determine and document the fair market value of the virtual currency in U.S. dollars as of the date of the transaction. If the virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, you should convert the virtual currency into U.S. dollars at the exchange rate in a reasonable manner that is consistently applied.
5. Basis: Maintain records showing the basis of the virtual currency, which is generally the fair market value of the virtual currency in U.S. dollars as of the date of receipt. This includes:
   • The date and time each unit was acquired.
   • The basis and the fair market value of each unit at the time it was acquired.
6. Identification of Specific Units: If you choose to identify specific units of virtual currency for tax purposes, you must document the specific unit’s unique digital identifier (such as a private key, public key, and address) or maintain records showing the transaction information for all units of a specific virtual currency held in a single account, wallet, or address.

By maintaining these records, you will be able to substantiate the positions taken on your tax returns regarding your virtual currency transactions.

Sources:
Notice 2014-21
Rev. Rul. 2019-24
Publication 544 (2023)
Cryptocurrency Customer Compliance
CCA 202124008