Not a tax attorney but I have satisfied myself about the law on this point and this is what I do.
Cryptocurrency transactions are taxable when they are executed. If you have had the asset for > 1 year it is a long term gain/loss, otherwise a short term gain/loss.
If you trade one crypto for another you have to consider that you have sold one for cash, then bought the other for cash and calculate your taxable gain/loss on this basis. There is a lot of misinformation floating around to the effect that as long as you don't leave "crypto world" your gains are not taxable but this is (almost certainly) incorrect. It hinges on whether trading one crypto for another is a "like kind" transaction (which, by the way, you have to declare) and most tax attorneys seem to agree that it is not, any more than selling one stock and buying another which is fully taxable.
The IRS has not formally ruled on this but I'm pretty sure this is the way it will go. If you have claimed "like kind" status on your crypto transactions you will have to pay back taxes and interest and possibly penalties. If you haven't declared them at all I wouldn't want to be you.
I havent declared anything yet. Just started these this year. Also how do you even go about declaring this? My initial trades were going from BTC to an altcoin. It was gain BTC then right away buy the altcoin. There was not gains in between to even report. How are we even able to report every small transfer since the crypto world is only done due to these exchanges. How can they treat this as normal taxes when its not normal in any way?
Generally when dealing with private equity trading, the IRS depends on 1099s from the exchange. Presumably the trading platform you're using tracks all your transactions and reports it to the IRS. If they don't, they are probably in violation for that; and you would also be in violation for not reporting it yourself through a Schedule D form, though it seems at least remotely possible that your penalties might be waived due to the cloudy situation. Interest and late fees would probably still apply. If you're using Coinbase or most other legitimate BTC exchanges, they are regulated by the federal government and it seems most likely they're reporting transactions and issuing 1099s at the end of the year. If you haven't received one for your Bitcoin trading by mid-March you may want to contact them to see what's going on. 1099s and tax documents for investment income are not actually required to be sent out to consumers until the beginning of March, as far as I know.
Keep in mind I'm another newbie though, just one with investment experience in equities; I haven't even set up a wallet yet, in fact, much less started trading on the exchanges. I may be mistaken about their regulatory status. Another thing to research before I start, it seems.
n.b. All this is assuming you're in the US. I am not a tax preparer nor qualified to dispense tax advice in any way other than recounting my private experiences.
