Digital assets are items stored electronically that can carry financial value, ownership rights, account access, or business use. This can include many different types of files, accounts, tokens, records, and online property. Some digital assets are used for business operations, such as sales data, important documents, intellectual property, and digital presentation files. Others, such as crypto assets or non-fungible tokens (NFTs), may be bought, sold, traded, exchanged, or transferred in ways that create tax reporting requirements.
Because assets stored digitally cover such a wide range of items, it helps to separate everyday business digital assets from the narrower category of digital assets that the IRS focuses on for tax reporting.
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How Businesses and the IRS Define Digital Assets
Digital assets do not always mean the same thing in every setting. For a business, digital assets usually refer to digital files, online accounts, customer records, brand materials, sales data, intellectual property, or other information stored electronically. These assets can often support daily operations, marketing, recordkeeping, financial reporting, and small business accounting.
For IRS reporting, the definition is narrower and focuses on digital representations of value recorded on a blockchain or similar system, including cryptocurrencies, stablecoins, and NFTs.
Business Digital Assets
In a business setting, digital assets may include:
- Logos, brand files, photos, and videos
- Website files, digital presentations, and marketing materials
- Sales data, customer lists, and internal reports
- Important documents stored electronically
- Intellectual property in digital formats
- Software, databases, and online accounts
- Gaming accounts, digital items, or virtual goods with resale value
IRS Digital Assets
When filing taxes with the IRS, digital assets are viewed as property rather than traditional currency.
Common IRS examples include:
- Convertible virtual currencies and cryptocurrencies, such as Bitcoin
- Stablecoins
- Non fungible tokens, often called NFTs
Types of Digital Assets
What are digital assets? Some digital assets are tied to a business’s financial records and intellectual property, while others function more like investment products, exchange tools, collectibles, or digital ownership records.
If you own digital assets of any kind, it’s important to understand how they may affect your small business bookkeeping, tax reporting, and overall compliance responsibilities.
Cryptocurrencies
Cryptocurrency is one of the most familiar forms of digital assets. Bitcoin, Ethereum, and similar crypto assets exist electronically and are commonly held in digital wallets or exchange accounts. Depending on the platform and asset, users may buy, sell, trade, exchange, or receive them as payment.
When it comes to cryptocurrency, the IRS’s definition of a digital asset includes the term “convertible virtual currency.” This means any digital asset that has an equivalent value in real currency or acts as a substitute for real currency. These assets may be used to pay for goods and services, traded on an exchange, or converted into other digital assets or money.
Stablecoins
Stablecoins are digital assets designed to maintain a more stable value, often by referencing another asset such as the U.S. dollar. Even when a stablecoin is intended to hold a stable value, it can still fall within the IRS digital asset category if it meets the tax definition.
Non Fungible Tokens
Non-fungible tokens, or NFTs, are digital assets connected to a specific item, file, or right of ownership. They are often associated with digital art, music, collectibles, gaming assets, memberships, tickets, or other online content that can be bought, sold, or transferred.
Tokenized Assets and Decentralized Finance
Some newer digital assets are used inside online financial platforms. They may give the owner access to a project, a share in a lending activity, voting rights, or another financial benefit. Their value can change quickly depending on the market, the platform’s rules, and what the owner does with the asset.
Business Files and Digital Asset Management
Not every digital asset is connected to cryptocurrency, NFTs, or blockchain technology. For many small businesses, this includes online records used for regular operations, such as signed contracts, payroll reports, customer lists, product photos, sales spreadsheets, cloud accounting files, and shared drive folders.
These digital assets may not be taxed the same way as crypto assets, but they still need some structure behind them. A business should know who can access financial records, where customer data is stored, how accounting files are backed up, and who owns files created by employees, vendors, or contractors.
Clear digital asset management can also make small business accounting and tax preparation less scattered when records are needed later.
Tax Implications of Digital Assets
Owning a digital asset does not always create a tax issue by itself. The tax questions usually begin when the asset is sold, exchanged, received as payment, used to buy something, or transferred in a way that changes ownership or financial interest.
For that reason, effective digital asset management and reporting often depends less on what the asset is called and more on what happened with it during the tax year.
Federal Tax Reporting for Digital Assets
Federal tax returns include a digital asset question that taxpayers must answer. The question asks whether the taxpayer received digital assets as a reward, award, or payment, or whether they sold, exchanged, or otherwise disposed of a digital asset or financial interest in one.
This can apply to individuals, partnerships, corporations, S corporations, estates, and trusts through forms such as digital Form 1040, Form 1065, Form 1120, Form 1120-S, and Form 1041. Even if a transaction does not result in a gain or loss, it may still need to be reviewed for reporting purposes.
Capital Gains, Income, and Business Records
For investment activity, how you manage digital assets for tax reporting often depends on cost basis, fair market value, and how long the asset was held before it was sold or exchanged. Short-term and long-term holding periods can affect how gains or losses are treated by the IRS.
For business activity, the same asset may be viewed differently. For instance, if a Raleigh-area business receives digital assets as payment, the value may need to be recorded as income. If the business later sells or exchanges that asset, there may be a separate gain or loss to calculate.
Good recordkeeping with a reliable digital asset management system or an experienced CPA is what makes those calculations possible. Taxpayers need to keep transaction dates, asset type, number of units, fair market value in U.S. dollars, cost basis, fees, wallet or exchange records, invoices, and other notes showing whether the activity was personal, investment-related, or business-related.
Form 1099-DA and Broker Reporting
Digital asset reporting is also changing for brokers. Under IRS rules, certain brokers must begin reporting digital asset sale and exchange transactions on Form 1099-DA for transactions on or after January 1, 2025. Basis reporting is phased in for certain transactions beginning January 1, 2026.
A tax form received from an exchange or broker can be useful for your records, but it may not show the full picture. Taxpayers are still responsible for checking their own records, especially if assets moved between wallets, exchanges, business accounts, or decentralized platforms.
North Carolina Tax Considerations
Business owners in North Carolina will want to consider state tax rules for certain digital properties. For example, gross receipts from the sale of certain digital property may have sales and use tax reporting requirements through the North Carolina Department of Revenue.
This is separate from federal digital asset reporting. A business in Raleigh, Durham, Morrisville, or the surrounding area that sells digital products, accepts digital currency, or manages online assets may need to review both federal and North Carolina tax treatment with a trusted Raleigh tax consultant before filing.
Digital Asset FAQs
Are Digital Assets the Same as Cryptocurrency?
Cryptocurrency is one type of digital asset, but the term is broader. Digital assets may also include stablecoins, NFTs, tokenized assets, decentralized finance assets, and certain other digital representations of value recorded on blockchain technology or similar technologies.
Is Simply Owning a Digital Asset Taxable?
Simply owning or holding a digital asset may not create taxable income by itself. The IRS notes that taxpayers may answer “No” to the digital asset question in certain situations, such as only holding digital assets in a wallet or account or purchasing digital assets with real currency without further activity.
Is Transferring Digital Assets Between My Own Wallets Taxable?
A transfer between wallets or accounts you own or control may not be treated the same as a sale. However, the IRS notes that if a transaction fee is paid with digital assets, that fee may create a digital asset transaction.
Is Paying for Goods or Services With Crypto a Taxable Event?
It can be. The IRS lists exchanging digital assets for property, goods, or services as a digital asset transaction. Depending on the facts, using crypto to make a purchase may require calculating gain or loss based on the asset’s value and basis.
Should I Work With a CPA if I Have Digital Assets?
You may want to work with a CPA if you sold, exchanged, received, mined, staked, or used digital assets during the year, especially if you have many transactions or business activity. Digital asset reporting can involve income reporting, capital gains, basis calculations, and federal or state tax considerations.
Contact Us Today for Digital Asset Tax Reporting in Raleigh
Steward Ingram & Cooper, PLLC works with individuals and businesses across the Raleigh-Durham area, including Morrisville, Cary, Chapel Hill, Apex, and surrounding communities.
If you are a business owner or an individual with complex financials who needs assistance with tax preparation, planning, and reporting, Steward Ingram & Cooper, PLLC may be able to help. We take on a limited number of clients each year–to inquire about our current availability and timeline, fill out the form below or call (919) 872-0866.
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