1. Keep Records of All Transactions

You must keep track of all your cryptocurrency transactions, including how much you paid for crypto, how long you held it for and how much you sold it for, as well as receipts for each transaction.

While your crypto exchange may provide a 1099-B reporting your crypto transactions to both the IRS and you, it might not record the cost basis, or original amount you paid for your crypto, if you transfer coins between offline cold wallets and your account.

To help address issues like these, “software companies have emerged that will scrub the blockchain to detect transfers between your wallets, whether on an exchange or not, and give you reports of all transactions related to the wallets you give it within a given tax year,” says Jon Feldhammer, tax partner at Baker Botts.

2. Fill Out the Proper Tax Forms

Once you have a record of your crypto transactions, you’ll need to fill out certain tax forms depending on how you used your crypto:

3. Hire a Professional

Preparing for cryptocurrency taxes can be complicated, especially since the laws surrounding them are constantly evolving. If you’ve made substantial income from crypto, it may be worth hiring a certified public accountant (CPA) who specializes in this type of tax work, so you don’t have the IRS chasing you down later.