A lot is changing fast in the world of crypto, including the tax rules.

As with most investments there will be taxes to consider before figuring out how much you really made – or lost – on your digital assets.

So if you couldn’t resist getting in on, say, bitcoin’s wild ride – which, for those keeping score, is more than 50% down from its all-time high – keep the following in mind.

When is crypto taxable?

Before you can figure out your tax obligations, you first have to be clear on what is considered a taxable event when it comes to buying and selling crypto.

Buying and holding: Simply buying and holding a virtual currency such as crypto is not taxable. And you don’t have to report the specifics on your tax return, according to the IRS, just as you wouldn’t report a stock or other asset you purchased and are holding in a brokerage account. (Although in this example, you would have to report any dividends or interest that investment generated.)

But what you do with your crypto after you first buy it may well be a taxable event.

El Salvador’s adoption of bitcoin as legal tender may have been a watershed moment for cryptocurrencies. But in the United States, even though you can use crypto to buy and sell products or services, don’t think for a minute that makes it just like cash – at least not if you want to avoid trouble with the IRS.

Virtual currencies are taxed as property, or as an investment, when you sell them. And using them to buy something counts as selling.

If you held the crypto for a year or less and it appreciated in value, your capital gain will be taxed as ordinary income. If you held it longer than a year, then it would be subject to capital gains tax rates.

If it lost value, you may use that capital loss to offset any capital gains you incurred in other investments.

If you’re paid in bitcoin, on the other hand, that will be treated as taxable income to you.

Paying someone in a virtual currency: That’s treated as the sale of your currency on which you will realize a gain or loss. The IRS notes that the gain or loss is determined by the difference between the fair market value of the good or service you purchase and your adjusted basis in the virtual currency used in the transaction (i.e., which is calculated using your original cost to buy the currency and any fees or commissions you paid to do so). Here’s an oversimplified example: If you pay someone in bitcoin for a $1,000 plumbing job and the cost basis of the bitcoin was $500 you’d have a $500 capital gain on which you owe tax.

In all these instances, if you fail to pay the tax you owe, you will be subject to interest and penalties and, in some circumstances, even criminal prosecution.

Will my state tax my crypto transactions?

Don’t forget about state taxes.

“Most states have not specifically addressed virtual currency, which means that the majority of states that have an income tax would follow the federal lead,” Luscombe said.

Any money you earn from your crypto investments or income payments will be factored into your federal adjusted gross income. And most states use your federal AGI as a starting point.

Two states – Nevada and Wyoming, neither of which have an income tax – have specified they would not subject virtual currency transactions to the state property tax, Luscombe said.

(For more information on these and other questions, the IRS has created this FAQ. And if your situation is particularly complex, see a tax professional with experience in this arena.)

New reporting requirements on tap

Right now it is still on you to keep all records of your crypto transactions, and to report the taxable ones to the IRS. You’ll also be asked to attest at the top of your 1040 form whether you received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency during the tax year.

But the IRS hasn’t been relying solely on your word. For instance, any business paying more than $600 to a non-employee or paying wages to an employee must report that income to the IRS, said Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting. If you don’t report that income you received, you could be flagged for an audit and/or an underreporting penalty.

But starting in tax year 2023, all of your potentially taxable digital asset transactions will be reported to the agency by outside parties.

It’s no different than the third-party reporting requirements that are in place when you hold a job or invest in stocks. You and the IRS get a W-2 form from your employer that reports your annual earnings and a Form 1099 from your broker that reports your stock transactions.

In an effort to make it harder to launder money, next year a business must report to the IRS whenever it receives more than $10,000 of cryptocurrency in a single transaction (or in two or more related transactions), just as it must when it receives cash above that threshold. Willfully failing to do so can be prosecuted as a federal felony.

You can’t stay anonymous

The new reporting requirements represent a potential upside for crypto investors in two ways: They’re a sign that crypto is here to stay. And given the headache of trying to keep track of all your transactions, getting a 1099 may prove helpful.

But the downside will be a loss of anonymity for those who want to keep their transactions private, or who have not met their tax obligations.

When you open a bank or brokerage account, you have to provide a lot of personal information that gets cross-checked to confirm you are who you say you are. You have to provide your legal name, address, phone number and a Social Security number or other taxpayer identification number, among other things.

But when you set up crypto-related accounts, the information you’re asked to give varies by platform.

“Until this year, it was pretty common you could open [an account or digital wallet] with a name and email,” said Erin Fennimore, head of information reporting at TaxBit, a cryptocurrency tax software provider.

Come 2023, that will change in many instances. “You’re going to be asked for personal information that you most likely have not been asked for in the past,” Fennimore said.

And the platforms required to report on your transactions will have to verify your identity.

In addition, when a digital asset is transferred from one broker to another, the transferring broker will have to issue a statement to the receiving broker that includes basis and holding period information on the transferred crypto so the receiving broker can satisfy its 1099 reporting requirements.