If you’ve sold some Bitcoin, it is important that you know Uncle Sam wants his share too.

Back in 2014, the IRS issued Notice 2014-21 stating the government’s position on what they call “virtual currencies.” It stated that such assets are considered property rather than currency. Under the rules for sales of property such as stocks, bonds and other investment assets, when you complete a sale, you must calculate your capital gain or loss and report it on that year’s tax return with Form 8949. At the most basic level, gain or loss is calculated as the difference between the original purchase price and the fair market value on the date of sale.

To use a simple example, if you bought a $25 gift card with Bitcoin, you technically must compute your original cost on that minute fraction of Bitcoin and report the gain or loss on your tax return. The same rules apply if you exchange that Bitcoin for other property, technically even another cryptocurrency.

It is important to note that the tax rates on capital gains differ depending on the amount of time between original purchase and sale. If you purchased that Bitcoin over 12 months ago, you would have a long-term capital gain. The maximum tax rate on long-term capital gains is 15 percent, but it can be as low as 0 percent depending on the highest tax bracket that you fall into. Purchases and sales within 12 months or less are short-term capital gains and are taxed as ordinary income. Capital losses can be used to offset gains, but the maximum net loss you can deduct in any one year is $3,000; any remainder carries forward to future years.

It should be noted, however, that the above is a very brief summary of capital gains rules; there are some finer points to be aware of and any good CPA can advise you regarding your specific facts and circumstances.

Now let’s be honest, it is extremely unlikely that you will be audited over an unreported gain from a $25 gift card purchased with Bitcoin. However, the IRS is very much aware that taxpayers may not be reporting their cryptocurrency transactions and is specifically on the lookout for people transacting large dollar amounts. In a recent decision in a California federal court, the IRS succeeded in having Coinbase turn over personal information and trading activity of users who bought, sold, sent or received more than $20,000 through their accounts in a single year from 2013 to 2015. The initial request from the IRS was actually for account information on all Coinbase users during that same period, but they subsequently narrowed the scope of the request.

The truth is that the IRS does not currently have a fully automated reporting system for cryptocurrencies, similar to what they have established with brokerages regarding sales of stocks and similar assets. As of the date of this article, Coinbase will only file a Form 1099-K for business-use accounts and GDAX (Coinbase’s trading exchange) accounts that exceed the annual reporting threshold of engaging in more than 200 transactions that amount to greater than $20,000. Compare this to when you sell a share of Apple, for example. At the end of the year, your brokerage is required to report to both you and the IRS your original purchase date and cost along with the sales date, fair market value and computed gain or loss on a Form 1099-B. If you fail to report the sale on that year’s tax return, the IRS will catch that error and send you a letter assessing tax, penalty and interest based on your underreported tax.

I suspect the IRS will be pursuing a similar reporting arrangement regarding cryptocurrencies, but don’t expect any changes in the short-term. We’re talking about a severely underfunded, understaffed and overworked government agency that is now also being tasked with implementing the Tax Cuts and Jobs Act (TCJA) signed by the Trump administration in December 2017. In fact, the Taxpayer Advocate Service, in its 2017 Annual Report to Congress, recommended that IRS funding be increased by $495 million over the next two fiscal years in order to implement the changes of the TCJA.

The bottom line is, the rules regarding tax reporting of cryptocurrency transactions have been public knowledge for years now, and it’s in your best interest to stay on the good side of the IRS. It’s worth stating again: A CPA will be your best resource to properly advise you on the tax rules regarding capital gains and losses and on how to minimize your tax liability.

Ryan T. Cooper is a certified public accountant based in New Mexico.