US IRS tax reporting for cryptocurrencies


#283

#284

Have not seen it before. But ,it’s so late in the tax season right now to even look at it!


#285

I started with cointracking.info and paid for the service so until that service is ended I haven’t had a need to look at any other services.


#286

Not for this tax season for sure but something for next tax season, I would say. :slight_smile:


#287

I will be using cointracking this tax year(2017). However something to consider going forward!


#288

Exactly,
When people say “I’m a HODLER so I don’t have to pay any taxes” this intrigues me. The only way this makes sense (to me that is) is if you purchase some of the “BIG 4” BTC, ETH, BCH, LTC(assuming you cash out on coinbase) because you can purchase these directly with fiat and then just HODL without trading for another coin that you may want. Buuuut, If you want to purchase EOS for example, you must first either purchase BTC, ETH and then convert that to EOS which is considered a trade and taxable event. Why would any assume you don’t have to pay taxes on that ? Does this just apply to those hoDLing on cyrpto on coinbase ? Am I missing something ?


#289

Edwin,
HODL’ers are LOOOONNNGGG term holders and are not trading at all.


#290

Peter,

I get that. But how do you purchase ETC with Fiat ?? How do you purchase ADA with Fiat?? How do you purchase ONT with Fiat ??


#291

Purchasing and selling is not hodling.

There is no tax to be concerned with if you are doing that.

You pay taxes if you are NOT Hodling. You pay taxes if you are converting one currency to an other. That is trading.


#292

Hi Peter,

I think that Edwin’s point is a subtler one, I have been struggling with it myself as well.

If I bought bitcoin and ETH 5 months ago, and want to HODL, I need to not sell ANY bitcoin, especially in a FIFO only world in order to qualify for LTG’s 7+months in the future.

If I now get interested in a new coin, let’s say IOTA for instance, there is no USD/IOTA market available on any major exchanges. This means, that in order to just purchase some IOTA, I actually need to purchase a coin that has a trading pair with IOTA. Generally, this is either BTC or ETH on most exchanges.

So, I trade my fiat for BTC today on say Coinbase, I then use the blockchain to transfer that BTC to say Binance immediately. On the same day I purchased this BTC, which I don’t even want to own, but which I must use as an on-ramp to get the IOTA, I trade it for IOTA. However, I find myself no longer HODLING my original BTC (assuming that I am forced into a FIFO treatment of my transactions.)

I bought BTC today which I don’t even want, it’s just my onramp to IOTA via the BTC / IOTA trading pair, and it’s ability to be quickly and cheaply sent from Coinbase to a foreign exchange with more trading pairs available.

But in order to turn BTC into IOTA, I need to sell the FIRST BTC that I purchased 5 months ago, not the one that I purchased today, I can’t sell it until I’ve sold every previously purchased BTC off… (under FIFO)

This seems to me like a strong case for the IRS allowing either LIFO or specific lot treatment of crypto’s, but the general consensus on the internet seems to be that FIFO is the safest bet, and that in order to qualify for specific lot or LIFO treatment, a number of rules must be followed up front that are impossible or nearly impossible to follow with crypto, especially given that some readings of the rule seem to interpret that only a true security (stock/bond) even qualifies for any non-FIFO treatment.

So in a world where Binance has over 120 trading pairs, but only 5 or 6 of them can be traded directly for FIAT, and the rest are all BTC/ETH/or maybe NEO or USDT, how does one truly HODL their majors if the prevailing opinion is that FIFO is the only tax treatment guaranteed to be accepted by the IRS?

I’m trying to get a letter from my CPA articulating this point as a defense of LIFO treatment of Crypto, it would be great if you could shed any light or experience on this topic though as the difference between the two is pretty significant for 2017 tax year (I filed for an extension, paid estimated LIFO based taxes up front)

Any thoughts or insights would be much appreciated. Especially if you have been through the process of filing LIFO or specific lots with any clients already and have had a ruling back from the IRS on this :slight_smile:

Very Best,
-D


#293

I wasn’t able to find the answer, so I’ll ask here.

Alright, so if you buy 1 BTC in 2017 for whatever price and pay the taxes on it. Then never buy any coins again. Do you have to pay taxes on that 1 BTC each subsequent year as the price increases?

So are paying taxes on that 1 BTC in 2018, 19, etc. As long as you hold it?


#294

You pay taxes on any gains after the coin converts. So if you didn’t change your bitcoin, there are no taxes to pay.

Also- buying bitcoin (with cash) isn’t a taxable event so per your example- you shouldn’t have paid taxes on it.


#295

@Rebecca_CPA - is spot on. The only thing that I would add and it is not necessarily relevant as you specified that you bought the BTC. Is if you mined that BTC and hodled you have had to pay taxes when you initially received it, but would not owe any other taxes until you sold or traded it. I only add this as it seems you are mixing several scenarios together.


#296

Thank you for the response. That helps a lot.

Also, if I were to cash out the BTC in a couple years. I would still have to pay capital gains on the difference, correct?


#297

Yes 20characters!!!


#298

Let’s see what tax changes come out then, especially geared to crypto, but probably more than likely.


#299

also, don’t forget to declare/ pay taxes on forks/ airdrops.

Yes, the IRS has not put out rules that specifically say “pay on forks and airdrops” but I, and many other accountants/ CPA’s/ IRS people, consider them to be equivalent to a stock dividend which is almost always taxable at the higher ordinary income rates.

This is just good taxpayer “hygiene” and that declaration establishes a good start date for your holding period and for subsequent tax rates (ie long term or short term).


#300

Wealth of knowledge. Thanks guys.


#301

@Peter_Rehm & @Rebecca_CPA. Heard this was FUD. Heard this was true. Not sure what to believe, but it seems this guy is screwed for HODLING. If this is so, are we not all screwed ??


#302

This is EXACTLY what I was talking about. I’m upset that I’m just now seeing this tho… smh. I went back and read my previous message to see if the message to Peter R could have been misunderstood, but I didn’t see how. Im sooo glad you understood and responded. I don’t see where he has responded to you. Has he responded and I am just missing something ? @Rebecca_CPA Would love to hear your input… And possibly hire your services…