Despite recent federal hearings on crypto regulations, the U.S. government has yet to decide on a blanket ruling on every kind of digital asset – let alone future ones to come. But now that there are over 17,000 different cryptocurrencies, financial experts advise taking a conservative approach when it comes to claiming crypto on your taxes.

Things could always change, even though there’s now more than 10 years of precedent that regulators, tax professionals and consumers have to guide themselves in their tax reporting decisions. The legal classification of crypto assets is still under constant discussion among federal regulators, but the IRS is, in the meantime, well aware of the profits people made in 2021 during a historic bull market in the digital asset space.

This piece is part of CoinDesk’s Tax Week.

Here are a few tips to help you avoid nightmares this tax season and accurately record your crypto gains and/or losses.

Bitcoin was the first and only cryptocurrency mentioned specifically by the IRS in its original 2014 notice deeming crypto as intangible “property” for U.S. tax purposes.

“The conservative approach from a tax perspective is to assume that all other crypto tokens and altcoins will follow the same classification,” said Kate Waltman, a New York-based certified public accountant (CPA) who specializes in cryptocurrency. “But in actuality, bitcoin and ethereum are the only two that have been specifically classified individually.”

At first, it looked like the most popular altcoin, ethereum, would be called a security by regulators, said Lisa Bragança, a former Securities and Exchange Commission (SEC) branch chief and Illinois-based lawyer. However, now ethereum is classified as an asset like bitcoin, not a security, though government agencies are still working out the details. Stay up to date on crypto news, always do your diligence and maintain excellent record keeping of your crypto transactions to make sure you’re prepared.

Investors have to pay capital gains on any profits resulting from the sales or trades of stocks or assets. Each and every time an investor trades bitcoin for ethereum, or exchanges crypto back to U.S. dollars, those transactions – no matter the size – technically involve the exchanging of assets.

“Unfortunately, with capital gains, you have to report all of them even if you have a $1 capital gain,” said Waltman. “If anyone has invested in the stock market in the past, they’ll know you get a statement from your brokerage account. Even if you have $5 of capital gains they'll be included in your statement.”

It works similarly for crypto, though it’s highly unlikely you’ll receive a statement unless you traded through a regulated platform that provides tax documentation.

Read More: You May Owe Crypto Taxes on These Surprising Things in 2022

If you do your taxes via Turbo Tax or another major online software, there will be a box to check to indicate you sold crypto in 2021. Checking this box should guide you to the appropriate forms to complete. If you work with an accountant or file your taxes by yourself, you’ll have to fill out a Schedule D Form 1040.

A growing number of third-party portfolio-tracking apps are being developed to help crypto investors keep track of their digital wallets and report their crypto assets accurately to the IRS.

Instead of writing down every transaction you make on Coinbase, Binance or another crypto exchange, you can simply link your digital wallets to an app that periodically pulls your data to compute total gains or losses for the year.

Popular options include Cointracker, ZenLedger and Koinly, according to Waltman. Every app works differently and comes with varying fees, but most tools include features to monitor price changes, display the total value of your portfolio and flag prices at the time of every transaction. Look for apps with integrations for each of the blockchains on which you transact and the capability to sync with your preferred wallets and exchanges.

The process of signing up and linking your wallets should only take about 15 minutes for a beginner crypto trader, according to David Kemmerer, co-founder and CEO of the crypto tracking app CoinLedger, which is rebranding from CryptoTrader.Tax.

“If you're more complex, such as in all these decentralized finance (DeFi) protocols and you have thousands of transactions, it's going to take longer because you have to reconcile a little bit more,” Kemmerer said.

The CoinLedger app also includes a dashboard for CPAs to access their clients’ information securely, according to Kemmerer. However, because crypto wallets can only be accessed by secret security keys, it’s more common for consumers to sync their own information, let the app fill out the appropriate IRS forms, and send the forms digitally to their accountants.

CoinLedger also has a partnership with TurboTax, said Kemmerer. This could be a perk for those who do their taxes online, either by themselves or with a virtual TurboTax professional.

Just because crypto is an emerging asset class with new and constantly updated regulatory guidelines, it doesn’t mean taxpayers will be off the hook when reporting their earnings to the IRS.

If you are not sure how exactly to report the profits from non-fungible tokens (NFTs), altcoins, or any number of DeFi transactions, use the best data you have available to show proof of the value of your assets and total profits, advises Waltman.

“As a taxpayer, your responsibility is to make a good faith effort,” she said. “As long as you can tell the IRS that you made a good-faith effort, and you and your accountant agree the valuation you’ve determined is as accurate as possible given the data that was available the day you received it, then you did your job.”

And if when completing your 2021 taxes you learn new information that reveals an error in how you reported crypto in previous years’ taxes, there might be time to fix them.

“You have a three-year window to amend prior year returns without any negative consequences,” Waltman said. “If you didn't report two years ago – maybe just because you genuinely didn't know how or you didn't have the help – you do have three years to amend.”

This article was originally published on Feb 21, 2022.