Description

Crypto Tax Prep for W-2 and 1099 Earners

You bought the dip. You staked the coins. Now the IRS wants their cut.

Here’s the thing about crypto taxes: your W-2 is one line on a form. Your crypto activity is 847 transactions across three exchanges, two wallets, and a DeFi protocol you used once in March. Traditional accountants see that and panic.

That Question on Form 1040

The IRS now asks at the very top of your return: “At any time during the taxable year, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

Coinbase, Uphold and Kraken report directly to the IRS now. If their data doesn’t match what you filed, you get flagged for automated audit. You can’t just skip it.

The Actual Problem

Your transaction history is a mess. You’ve got inconsistent cost basis across exchanges because you moved coins around. You paid gas fees that should reduce your gains but aren’t getting captured. Your staking rewards count as ordinary income (taxed like salary), not capital gains (taxed lower). And if you touched DeFi or minted an NFT, most accountants have no idea how to handle it.

If you export a CSV and plug it into TurboTax, you’re probably overpaying, triggering red flags, or both.

What They Actually Do

The team of tax professionals that Digital Ascension Group works with prepares your full 1040, including the boring stuff like your W-2, 1099 income, mortgage interest, and deductions. You don’t need two accountants.

For crypto specifically, their team generates Form 8949 and Schedule D for every trade. They separate short-term gains (taxed as income) from long-term gains (taxed lower). This matters.

The biggest source of overpayment is the “zero cost basis” problem. If an exchange doesn’t know when you bought a coin, they assume you got it for free and tax you on the entire sale price. Their team traces your coins across wallets to find the actual purchase price. This usually lowers your bill significantly.

Staking rewards, airdrops, and mining income all get taxed as ordinary income at the moment you receive them. Their team calculates the USD value at the exact timestamp of each transaction.

If you’re sitting on losses, their team makes sure they’re reported correctly so you can offset up to $3,000 of W-2 or 1099 income per year and carry the rest forward.

For 1099 contractors, the team of professionals we work with looks for business deductions you might be missing: hardware wallets, mining equipment, home office use.