US IRS tax reporting for cryptocurrencies


Well thanks for you insights… I’ll be doing a little bit of more research and I’ll do was right for me and my Uncle Sam… thank you :blush::pray:


HI all, thank you for the comments above - very helpful. I think I read everything but I still have a few questions / points of clarification (thank you in advance!!):

  1. Since at the moment BTC (and possibly all tokens?) are classified as property and not securities, are wash sales legal? i.e. I bought BTC at $15k and during a correction I sell and immediately repurchase it all at $8k. Can I recognize this capital loss? Other sites make it seem possible, but not clear if that makes it legal…
  2. In the selection of accounting treatment are we allowed to use specific identification? While more complex this seems like the best way to minimize cap gains tax legally
  3. How does the selection of accounting treatment affect whether gains are short term vs. long term? This seems somewhat intuitive for LIFO, FIFO and specific identification (just want to confirm)… but if you do a weighted average this seems broken…?
  4. Just to confirm: accounting treatment is applied retroactively from the end of the tax year for all transactions during the whole year, right? That is, this is not done on a rolling basis… To use a quick example under LIFO, one does the following trades chronologically within 1 tax year:

Buy 1 BTC @ $1,000
Buy 1 BTC @ $2,000
Trade 1 BTC for 10 Doge (1 BTC still trades at $2,000)
Buy 1 BTC $10,000

Only taxable event is sale of 1 BTC to buy Doge… under LIFO that is the BTC purchased @ $10k … so you recognize a $8,000 cap gains loss right?

You CPAs helping out are saints - Thank you


But what if you have too many miners and your electricity bill is off the charts in the states? And you don’t have a registered business in the states because you don’t have a tax-id? I’m just trying to figure out if this Estonia thing is worth looking at lol.


IRS tracking down crypto evaders harder than ever:


What a surprise.

At least they legitimize crypto more in this sense.


If you are in the USA I believe that it is based on residency anyway. As a US citizen you need to pay taxes, so the Estonian "economic citizenship " thing seems moot. Since the IRS is going to crack down hard, this is going to make someone look more suspicious to them, I’d think.

2018 is going to be the year of regulation. It brings us closer to adoption, but it will shake out a lot of hands with how rough they’re about to be on some evaders…


Hey @Peter_Rehm, quick question. What if you’re holding a coin that produces interest? I’m assuming if you don’t claim the interest then you don’t pay additional taxes for that and vice versa?


Are they actually paying you? Pay taxes on the amount of interest that you actually receive.


It just shows how much coins I can claim, kind of like NEO GAS. They just show you how much gas you have accumulated but it’s unclaimed until you actually claim it.


more coins = interest = income. Nice going there!


There’s a few coins that produces interest:


For those using a CPA, are you giving them all the CVS spreadsheets from all exchanges for them to calculate or can you just print out the “Realized Capital Gains” sheet from and have them report that figure?


Interesting but does at face value sound illegal:

E-residents will have their financial footprint monitored digitally, in a manner stated to be transparent; the reaction to the widespread financial misbehaviour at high level revealed by the Panama Papers leak was suggested to be a factor helping the more transparent Estonian initiative according to Korjus. E-residency itself does not have an effect on income taxation — neither does it establish an income tax liability in Estonia nor does it relieve from income taxation in the resident’s home country.[5]


Being a CPA I’d love to have my clients provide me with all of the information required to recreate the numbers because 1.) it provides me with a copy of the source data to the summary numbers they provide 2.) It provides me with cover from later possible IRS audits of the client 3.) It provides me with coverage from later possible peer and insurance company reviews 4.) it provides me with coverage on any other subsequent issues.

I’d actually be somewhat leery of taking on a new client who had significant cryptocurrency income if they did not provide this information for the reasons above.

But yes, you can just give your summarized realized gains info to your CPA and see if they ask for or demand the backup.


this post didn’t go under who i was replying to, so I was out of place and edited it.


I ask for backup for audits. However if my client calculates and provides me with the info, that is fine as well. At the end of the day, the client is responsible for the information provided for the tax return so you have to make sure it is complete.


I gave my CPA every spreadsheet I could possibly provide. Transactions, Buys, Sells, Cost Basis for Tax Reporting (Coinbase). I also provided my personal spreadsheets that I manage on the side. The CPA meeting went real good. He understood it and knew his stuff. I’m set on my CPA now, no worries.


Does anyone here how if Changelly transactions are considered all Buys or not for tax purposes? Since they are Like-kind exchanges and I chose to receive one cryptocurrency in exchange for another (eg. Trading ETH for BTC). I’m wrapping up my taxes and this would be the final bit of data to include. Thanks for any input you guys might have!


Hi! I’ll answer this question presuming that you are a taxpayer in the USA. I see that these guys are based in Prague, CZ and that they provide no tax advice on their web site.

Short answer: Trying to use like kind exchange taxation rules will only get you in trouble with the IRS for transactions on any exchange. So no, if you exchange ETH for BTC you will have a taxable exchange. Use form 8949 and then schedule D to report your gains/ losses.

DM me directly if you have any further questions about taxation of exchanges.


Is it Ok if I use for tax?